The CEPA(Comprehensive Economic Partnership Act) Debate: How can we create Employment
Posted on June 8th, 2010

By Garvin Karunaratne, Ph.D. Former Government Agent, Matara District

A great deal of water has flown down arguing the pros and cons of the CEPA which India wants Sri Lanka to sign. Even the Mahasangha has got involved with utterances by the Mahanayaka Theros at Kandy.

To start with let us see what happened to Sri Lanka when Chandrika Kumaranatunge signed the earlier Indo Sri Lanka Trade Agreement. I lived in Sri Lanka at that time and saw for myself how our industries gradually ceased to exist due to competition from indian products. Our bureaucrats think in terms of goods being imported and of financial transactions. It went far beyond. When the Indian goods came in there were groups of Indians who also went house to house in Colombo selling the imported goods. I could see them all over and whenever I saw them I would make it a point to speak to them. They spoke in English and the manner of speech, their intonation belied that they were Indians selling their housewares on our soil. I am certain that the Visas they held did not authorise them.

The Sri Lankan Ministers who handled industries were actually unaware that the President would sign such an agreement. I can remember the circumstances because though I left the Administrative Service as far back as 1973, since then I have trailed development in Sri Lanka. Though not in the Service I followed development- every step of it and can speak with firm authority due to my interdisciplinary academic studies.

The President Chandrika went to Indiaa for some other purpose and she was feted and hosted to such an extent that she was cornered to sign this Agreement. As I wrote in 2001: “The India- Sri Lanka Free Market Agreement was one method by which India hijacked our industries.”(The Island: 5/9/2001) As a result of this Agreement Indian imports have actually flooded the Sri Lankan market and that sounded the death knell of a number of our industries. The Indian exports to Sri Lanka has increased from $ 510 in 1999 to $ 600 million by 2000 and to $ 3443 million by 2008. On the other hand, exports from Sri Lanka to India were at $ 47 million in 1999, increasing to $ 58 million by 2000 and only to $ 418 million by 2008.

That scenario by which Sri Lanka got played out by India made me write in 2001:

“The value of Indian exports to Sri Lanka in 1999 was $ 510 million while the exports from Sri Lanka to India was only $ 47 million. There was a trade deficit of $ 463 million in favour of India. There is no need to spend on imports from India to this extent because we can easily make what India sends us if only we want to. There is no point in having a Ministry of Industries, a Department of Small Industries, an Industrial development Board and many other such institutions if our policy is to import everything and to plan for BOI projects for foreigners. These Ministries and Departments should be scrapped immediately and allow the importers, retailers and foreigners to run this country. This is exactly what we do now. With the liberalization of trade under the Indo Lanka Trade Agreement Sri Lanka has been taken for a ride. The only guideline I can suggest for the Government to follow is to restrict the imports from India to the extent of money generated from exports to India”. (From How the IMF Ruined Sri Lanka…, (Godages, pg.164)

It looks as if things have moved in the right direction today to make everything we need locally. That is the motto of President Rajapaksa in keeping with the Mahinda Chintanaya. It is reported that we are even trying to make all our railway coaches- something we made in the period before 1977.

Our President Rajapaksa has decided that we should step up our production. That is the only way ahead. There will be a hue and a cry from India and their urging us to sign the CEPA is only a part of this game. There will be protests from our importers and the Developed Countries who send us goods, but we have to face the fact that our own people are unemployed and for every dollar we spend on imports we are actually creating employment for people abroad. The UN and the WTO will crucify us, but we have a strong man in our President to stand up for our country.

This is a lithmus test for Sri Lanka’s economy. Since 1977 we fogot our own people and followed the IMF prescriptions of liberalising imports. We have gone on this road from 1977 till at least 2005, almost three decades and our people who fail to find employment go abroad. My nephew who obtained a Degree in Electronic Engineering from Edinburgh was keen on working in Sri Lanka. When he came he could not find a job in the field of engineering. What he found was to sell computers at Keels- a salesman’s job. He migrated to Australia. If we stop imports we have employment for all our people. There is no question about it.

We should not be enticed by various countries. India is primarily concerned with its economy and the manner in which she has run it by shunning all imports and producing everything its population needs should offer us hope. Go to any city anywhere in India and it will be Indian products. Imported things are smuggled in somehow and are available at a very high price. This was the situation in Bangladesh too. Imported items are brought in by people who come and are sold at a profit. These get to the market and are sold at a high price. What is important to realize is that in both India and Bangladesh the countries do not incurr their hard earned foreign exchange for these imports. These countries have mastered the art of levying taxes on imports without incurring the country’s foreign exchange.

Sri Lanka has to follow a path of finding full employment for its people, be they in the North, East or in other areas. The emphasis has to be on creating employment and it is my idea that this is a prime requirement for our economy. All agreements on imports has to be guided by this.

Our public service is mostly working on administration and providing services. In any country there is a very small core of people handling development. It is necessary that the task of development and production has to be given priority. Let me take the work of the Land Commissioner’s Department. There is a vast staff of District Land Officers in every District. At the colony level there are overseers attending to settle disputes among colonists. These officers should be charged with creating employment in their areas. The colonies and the village expansion schemes in Districts where land was granted to the people should become areas where vegetables and fruits are grown and this has to be the task entrusted to these officers.

The Public Service is full of officers who are administering services. Once long ago I was living with a few labour officers whose main duty was to enforce the Shop Act-the law pertaining to the opening and closure of shops. They would go on inspections to ensure that no shops were open after 6 p.m. and the shops did not open before 8 AM. To my mind it was a total waste of effort and money.

In my days at Kegalla and Matara as Government Agent I had close upon 250 Grama Sevakas in the District. This number has been increased almost three to four times and now I think there is a Grama Niladhari for every 250 houses. Their task is pure administration. It is necessary to put them to tasks of development in their areas. To my mind these Grama Niladharis should be working on the creation of employment.

Some could think that I am talking of an ideal situation, something that could not be achieved. In my consultancy as the Commonwealth Fund Advisor on Youth Development for the Ministry of Labour and Manpower in Bangladesh, at a conference of chief officers the Hon Minister Aminul Islam, after reviewing all the programmes of training and work of the Youth Development Department put me on the spot by asking me what contribution I could make to Bangladesh. Without batting an eye lid I said that the Ministry should commence an employment creation programme, because it is only then that training in any particular discipline will be complete with the trainee becoming an entrepreneur, a contributor to the economy. At that time the Ministry trained some 40,000 a year and most of them remained unemployed. They were bestowed with certificates with the signatures of Ministers at times signed in gold. But they were lost not knowing what to do. I was speaking about a new concept. My idea was abruptly brushed aside by a statement that the ILO had tried hard in the earlier three years to establish a self employment programme and had spent millions with international specialists buzzing around in air conditioned vehicles, working around the clock and had miserably failed. What ensued was a highly argued debate between me one one side with my new concept and a range of Secretaries of Ministries on the other side, stating they Youth Work should not include the elements of establishing employment. They harped again and again that the failure of the ILO Project meant that it would be a waste of funds. It lasted over two hours with Minister Islam a painful listener. Ultimately he shut us all up and asked for the number of programmes that actually create employment. The answer was none. The ILO had tried the impossible and I had argued that I should be authorized to try to establish an employment creation programme. He immediately authorized it and I got down to work the very next day with a handpicked staff addressing trainees in my broken Bangla on how to become productive. I worked with Bangladeshi officers who willingly shared with me the travails of working a fourteen hour day, with no week ends or holidays. There is not a dirt track where I have not been in Bangladesh. Today the Youth Self Employment Programme is a full fledged programme training 160,000 youths to become self employed every year. The Programme had bagged a millon as self employed on a commercially viable basis earning the salary level of a clerical officer in the public service by the end of 2005.

Today this Programme is one of the chief programmes of development, with a direct allocation of funds from the Planning Commission of Bangladesh. It is run by Youth Officers who were given training in economics, in enterprise creation by me. It is a programme that has left its imprint on the sands of time, a programme that offers hope to any country that wants to bring about development. Bangladesh has been also spared of the 1971 and 1987 riots of Sri Lanka because the unemployed youths, the low achievers have all been enlisted on this programme and are not available for the subversive elements to recruit. Youth Workers who once did traditional youth work with them are now busy guiding them to become entrepreneurs, making them contributors to the economy instead of being consumers.

Garvin Karunaratne’

Formerly of the Administrative Service of Sri Lanka,

San Diego 7/6/2010

(A full paper on the Youth Self Employment Programme, is available at pages 355 to 426 of my book: How the IMF Ruined Sri Lanka & Alternative Programmes of Development, Godages)

9 Responses to “The CEPA(Comprehensive Economic Partnership Act) Debate: How can we create Employment”

  1. M.S.MUdali Says:

    //A great deal of water has flown down arguing the pros and cons of the CEPA which India wants Sri Lanka to sign. Even the Mahasangha has got involved with utterances by the Mahanayaka Theros at Kandy.//

    India wants to sign? or both India and Sri lanka are willing to sign?

    Mahasangha is not an expert in Politics or Economics. It always ask favours from the state like trade unions!

  2. cassandra Says:

    Mr K,
    It’s good to have someone like you, who has ‘been there and done it’ as it were, to sound this note of caution. I seem to recall that when SWRD Bandaranaike became PM, he proposed some sort of regional free trade agreement and the one who did not embrace the concept at the time was Nehru – and the reason? He feared China would dominate it and be the biggest winner out of it. Agreements like the CEPA are always touted as ‘win-win’ arrangements conferring benefits on both sides. But simple logic must tell you that such benefits cannot accrue in equal measure . This is not to say we should reject these agreements out of hand but they need to be examined very closely and in doing so the record of what has happened in the past should be examined very closely. To vary a famous saying, ‘Beware the Indians when they come bearing gifts’.

  3. orpheusperera Says:

    Majority of readers of Lankaweb sharesthe opinion of Dr. Karunarathne.
    I believe that the media secretary to the President passes these information over to his Excellency the President. I think signing of such a deal cannot be done by the president. It should be debated in the House of Representatives.
    It is in the best of interest of the country, that Dr. Karunarathne sends this letter to the President and the Minister of Trades and the minister of Industries directly, in case the media secretaries don’t read these columns.
    There are millions of dollars worth of products awaiting in India looking for a place to dump them. They use child labour to manufacture some of their goods. On top of this American Garment industrialist are moving some of our business to India, because they have cheap labour. Once the Sri Lankan producers lose the market and vanish, India will start to increase the price of their exports, causing hardships for Sri Lanka in the future. It looks like our businessmen (importers) don’t give damn about the future of the country, as long as they can become billionaires without much effort.
    I wrote few letters to this column during the war. One point I always emphasised on was the jobs for the farmers in the north by stopping the import of Onions, chillies and potatoes from India and to encourage our farmers to be self sufficient. There are also millions of Indians unemployed waiting to get out of the country. Highly qualified will try South Africa, UK, USA, Canada and Australia. Other skilled will look for jobs in the Middle East. Rest will come to Sri Lanka and take our jobs and businesses.

  4. orpheusperera Says:

    Those days India had a closed economy. They wanted to make sure that no imports are going to kill their industries in their infancy (Mahatma Ghandi’s Visions for India). Now they are opening to the world, because nobody will buy goods imported from Sri Lanka and the exports will be a waste and the importers in India will stop importing from Sri Lanka in no time. India will dump cheap goods imported from India; naturally people will go for the cheaper products. Why would poor man pay Rs. 100 for a Kg of onions made in Sri Lanka when a Kg is only Rs.50 in the next door? People don’t think that this will kill the local producers and the prices of the imports will go up as soon as the local industries are dead. I am not and economist, but it is simple logic, I have seen it before.

  5. orpheusperera Says:

    Sorry, I do not know the content of the agreement. I go by the letters written by others. If it specifies the items that can be imported to Sri Lanka it is a different issue. If the goods are high high-tech equipment, cars, trains and busses not traditionally made in Sri Lanka it could be not that harmful.

  6. dhane Says:

    In my opinion CEPA is hidden Indian agenda to create India economy power in Sri Lanka same an in Fuji Island. It is Indians who control Fuji economy and one time Fuji had Indian PM. I think India had already achieved partly with earlier Indo Sri Lanka Trade Agreement. This CEPA is second Part. Why not we ask personal experience of making biscuits in India by Munchee Biscuits Mr. Wickramasinghe

  7. M.S.MUdali Says:

    “Dumping” is not a Trade practice but under Trade that can happen. I remember the “USED” tires and motor bikes” in the JR era.

    Both India and Sri lanka are Agri nations. SL must take action to control the “free flow” of food items when no scarecity in SL for those items!

    A tribunal to be setup to investigate complaints on the basis of agreements. Because no one must argue that they have a right to DUMP.

    I still hope SL politicians will read the US-Canada-Mexico Free Trade agreement before commit any blunders!

  8. Fran Diaz Says:

    Look what has happened in America :
    “In the good old 1950s, when U.S. cars dominated the planet, it was famously said that what’s good for General Motors is good for the country. But as GM and many other companies move jobs offshore, that assertion is now being challenged.
    The first wave of offshoring took place in manufacturing. Automakers set up plants in Mexico. Garment companies emptied their lofts on Manhattan’s Seventh Avenue and sent their designs to be sewn everywhere from the Dominican Republic to Sri Lanka.
    The next job exodus came from the service industries. Large, well-trained Indian workforces now write computer programs for major U.S. corporations. Call centers in the Philippines answer customer queries for insurance firms.
    And now jobs that require even higher skills are quickly being moved offshore. Chinese engineers bid to create blueprints for chemical plants for U.S. multinationals, and integrated circuits are designed in Singapore. Boeing may soon manufacture planes in China”.
    Net result ? High Unemployment in USA – all for the profit motive !
    What NOT to do in Lanka ? That is to create jobs but do not hand it over to foreign labor imported from our neighbors ! ” ALL Lanka jobs for Lankans” should be our motto. Next motto should be “good business practices over profit motive”.
    We should also explore Co-operatives & Employee owned businesses too. Small to Medium size businesses will suit Lanka best.

  9. Lanka Peiris Says:

    For fair-play there must be a level playing field. Our business men and their financial capacities cannot compete with the Indians. First Sri Lanka and its enterprises in all fields must be developed. Our youth and our people should be given the first bites of the cake. Thousands of unemployed Indian graduates loitering the streets of India will be taking away the employment oppertunities. How many Sri Lankans were employed at the ‘Apollo Hospital’ when it was run by Indians……… It is time the President put people like Garwin in advisory roles to use their expertise and experience for the benefit of Sri lankans.

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