By Dr Garvin Karunaratne, formerly of the SLAS

Introduction

The manner in which industries are run in any country determinesƒÆ’-¡ƒ”š‚ the employment levels in the country, details how the assets of the country are utilized and also who benefits from the riches accruing from the value added in the manufacturing process. The key to solving our problem of poverty and unemployment lies entirely in the field of industry.

ƒÆ’-¡ƒ”š‚ At the outset it has to be stated that the development of industries comes later than the development of agriculture. It is far easier to develop agriculture. Agricultural development is a pre-requisite for industrial development because industries essentially depends on ƒÆ’-¡ƒ”š‚ agriculture for its raw material.

ƒÆ’-¡ƒ”š‚ The Aim of this Paper isƒÆ’-¡ƒ”š‚  to detail the importance of industries to the economy, how industries were handled in the past, the effort that went in, the errors we made and why they occurred, also exploring the best method of utilizing industrial development in the national interest of Sri Lanka..

ƒÆ’-¡ƒ”š‚ The importance of industries was realized as far back as 1959.ƒÆ’-¡ƒ”š‚ The Ten Year PlanƒÆ’-¡ƒ”š‚ of 1959 states:

What other avenues of employment could be developed for the countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s growing workforce? The answer lies mainly in the field of industrialization. The case for industrialization is by no means basedƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ entirely on the employment factor. It could be justified on grounds of productivity alone.

ƒÆ’-¡ƒ”š‚ The writerƒÆ’-¡ƒ”š‚ was involved in agriculturalƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ and industrial development in Sri Lanka as a member of the Administrative Service for eighteen years and speaks withƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ first hand experience. As theƒÆ’-¡ƒ”š‚ Commonwealth Fund Advisor to the Ministry of Labour and Manpower in Bangladesh, when confronted with severe youth unemployment, he designed and established the Youth Self Employment Programme in Bangladesh in 1982, which has grown to become a successful self employment programme,ƒÆ’-¡ƒ”š‚  easily the premier employment creation programme today. He is also equipped with academic knowledge in economics gained at premier seats of learning at the Universities of Edinburgh and Michigan State.

ƒÆ’-¡ƒ”š‚ The Colonial PeriodƒÆ’-¡ƒ”š‚ 

The colonial preceptƒÆ’-¡ƒ”š‚ followed for well over four centuries was for all the colonies to be producers of raw materials and for the raw materials to be exported in its original form. This was to enableƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ the factories in the Mother Country to utilize the raw materials for manufacturing. Take rubber as an example- vast plantations were established in the colonies of Malaysia and Sri Lanka; the raw rubber was exported to Britain, where it was turned into tyres, bringing employment with wages to the workers in Britain and riches to the manufacturing conglomerates. Thereafter ironically, the tyres were exported back to Sri Lanka and Malaysia where it was sold to consumers- to the very people that grew and harvested the rubber. The riches created in the process of manufacture and the sale of the tyres was enjoyed byƒÆ’-¡ƒ”š‚  the manufacturers, the salesmen and the shippers inƒÆ’-¡ƒ”š‚  Britain. The colonies not only produced the raw material but also served as the consumer for the manufactured product. This encapsulatesƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ the manner in which industries were run by Britain, with the colonies being used for a small part of the production process. The colonial guideline was for the colonies to import every manufactured item from the Superpowers. Sri Lanka was the consumer for all consumer goods- tyres, biscuits, jams, perfumes, coffee, tooth paste, pen, pencils, paper, soap ƒÆ’‚¢ƒ¢-¡‚¬ƒ¢¢”š¬…” everything one can think of, all from Britain. Walking on the roads in the Bahamas, another British colony, where I worked for two years, even the manholes were from Britain

ƒÆ’-¡ƒ”š‚ The Post Colonial Period

When the colonies became independent the Governments commenced establishing ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ industries to create employment for the people, in order to retain the value added in manufacturing within the country.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ This was done with speed and resulted in creating employment for the people and profits for the investors in the manufacturing process.

At this time from 1948 to 1977, though Sri Lanka did not have a major foreign debt it was necessary to balance the foreignƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ exchange budget. The IMF had not come up with its ridiculous ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”deficit budgetƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ concept. In short, foreign funds had to be found for expenditure incurring foreign exchange. Foreign exchange was carefully disbursed in the interests of the country. For every import the approval of the Central Bank was necessary. As far as industries were concerned the Ministry of Industries had an allocation of foreign exchange which was allocated to large industries and the Small Industries Department had an allocation to be given to small industrialists. Small industrialists who were in production had to register with the Department of Small Industries, make a declaration about the machinery they have and provide details of their production and what they required to import in the form of machinery or raw materials that were needed for them to be in production.ƒÆ’-¡ƒ”š‚ I was the Deputy Director of Small Industries in charge of the registration of small industries and the allocation ofƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ foreign exchange in 1970/1971. I had a number of Inspectors who had a good knowledge of small industry. They inspected the industries and assessed their capacity. As a rule industries were registered only where the import content of raw material was less than 25%. In the case of machinery the criteria was that the production was required in the national interest. I conducted a supercheck to assess the veracity of their reports. Based on their reports foreign exchange was allocated. It also meant that the Department had the ability to ensure that the production was satisfactory. The Sword of Damocles hung on the industrialists and the allocation of foreign exchange would be cancelled ifƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ either the production faltered or was not of good quality.

ƒÆ’-¡ƒ”š‚ Every effort was made to make things locally.ƒÆ’-¡ƒ”š‚ It was import substitution at work. Perhaps the following account of what we did achieve will convince anyone that import substitution can be done successfully. Our aim was two fold- to create employment and also to save foreign exchange

ƒÆ’-¡ƒ”š‚ The Government at first established aƒÆ’-¡ƒ”š‚ Rural Development and Cottage Industries Department, to foster the establishment of cottage industries as a part of rural development work.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ The aim was to utilize local resources and create employment aimed at making consumer goods. Basic industries were established in local crafts like needlework, mat weaving, coconut fibre products etc. In rural areas an Industrial CentreƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ was established under a Textile Instructor, where, the main effort was to train young girls in handloom weaving.

TheƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ scope for establishing manufactures was vast.ƒÆ’-¡ƒ”š‚ The cottage industries activity was developed into aƒÆ’-¡ƒ”š‚  Small Industries DepartmentƒÆ’-¡ƒ”š‚ that handled small industries including Textiles.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ In the Districts an Assistant Director of Small Industries was appointed to beƒÆ’-¡ƒ”š‚  in charge of all industries and he supervised the Powerlooms, the Handlooms, Carpentry and Textile Centres. Power loomsƒÆ’-¡ƒ”š‚ were obtained from China and established in almost all districts under the aegis ofƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ worker cooperatives and handled as a branch of the Divisional Multicooperative Society.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ These Power looms were helped in all technical matters by Velona, a Departmental Centre established in Moratuwa. The Department imported yarn. The Power looms manufactured textiles of high quality and even Sri Lankans that resided in European countries bought Powerloom suiting when they came on holiday.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Some Powerlooms like Hakmana in the Matara District built up a name for quality suiting material, like sarongs from Bangladesh and sarees from Benares. The Textile Centres taught village lassies handloom weaving and they established weaving units in their homes, with technical support from the Textile Centers. Handloom sarees with individual designs were in high demand.ƒÆ’-¡ƒ”š‚  Textile Mills were also established at Tulhiriya and Pugoda where fabric was made. By 1977, Sri Lanka, through its Textile Mills,ƒÆ’-¡ƒ”š‚  Powerloms and Handlooms, was almost self sufficient in all textile requirements. An important aim of this Programme was to bring industries toƒÆ’-¡ƒ”š‚  rural areas.

ƒÆ’-¡ƒ”š‚ In order to help small scale industrialists and the handloomers to market their production, the Department of Small Industries established Laksala, a commercial emporium to sell cottage crafts, handloom and powerloom textiles.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Branches were also established in certain cities.

ƒÆ’-¡ƒ”š‚ Buses, lorries andƒÆ’-¡ƒ”š‚ railway carriages were built locally, on chassis that were imported. HundredsƒÆ’-¡ƒ”š‚  of carpenters worked at the Railway Workshops at Moratuwa, and at allƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Bus Depots. At the South Western Bus Depot in Ratmalana, one of the largest bus body building factories there was a work force of a few hundred carpenters at work.

ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ In the Fifties all our requirements ofƒÆ’-¡ƒ”š‚ processed foodƒÆ’-¡ƒ”š‚ were imported- jam and fruit juiced from Australia, tomatoe preparations from Britain, Singapore etc. Dr N.M.Perera, the Minister of Finance in the 1970-1975 Government rightly commented:

It is really a matter for concern that a predominantly agricultural country like Ceylon should waste its valuable foreign exchange resources on the import of items which could be successfully produced locally.(N.M.Perera:ƒÆ’-¡ƒ”š‚ The Economy ofd Sri Lanka:1971)

ƒÆ’-¡ƒ”š‚ In the Fifties and Sixties right up to the General Election in 1977, a concerted attempt was made to manufacture food products locally. The Department for Development of Agricultural Marketing(MD) was in the forefront of this move. I was Assistant Commissioner of Marketing from 1955 to 1959. The DepartmentƒÆ’-¡ƒ”š‚  established aƒÆ’-¡ƒ”š‚ Canning FactoryƒÆ’-¡ƒ”š‚ in about 1955 which producedƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ fruit juice out of oranges, jam from oranges, and other fruit. Floor prices,ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  (i.e. prices at which the total produce offered was purchased) were fixed forƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ pineapples, red pumpkin and ask pumpkin. Red Pumpkin was turned into Golden Melon Jam and Ash Pumpkin into Silver Melon Jam. With this effort, it was possible to become self sufficient in jam, and fruit juice.

ƒÆ’-¡ƒ”š‚ The MD was instrumental in producing food preparations out of lime, lemon, woodapple, passion fruit, guava and many other local varieties of vegetables and fruits.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Pineapples were canned and exported bringing in valuable foreign exchange.

ƒÆ’-¡ƒ”š‚ The MD also implemented the Vegetable and Fruit Purchasing Scheme, where the Department competed with traders and purchased vegetables and fruits from traders, transported the goods overnight to Colombo and sold them at low prices at many retail outlets in the cities. This was a boon both to the producer as well as the consumer because as a rule the Department paid more than what the traders paid to the producers and sold the goods at cheap rates because the margin kept was only around 10% to cover cost of transport. This was the Development Infrastructure for Marketing which was a unique scheme found only in Sri Lanka. This Scheme helped the food processing industry by increasing the production of fruit and vegetables that went into the industry. For food processing industries to succeed we have to be producing in excess of our consumption requirements.

ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ InƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ the case of tea, the leaves were dried and exported in bulk. Initially the bulk was exported to Britain and thereafter re shipped to other countries after blending.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Latterly Sri Lanka built up trade direct with other countries.

CoconutƒÆ’-¡ƒ”š‚ was processed into oil and dessicated form for export. Coconut was used for the manufacture of biscuits which in turn was sold back to consumers in Sri Lanka.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ A few Biscuit factories were established in Sri Lanka which produced high quality biscuits.

In the case ofƒÆ’-¡ƒ”š‚ rubber, the entire production was exported.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ With the greatest effort a tyre factory was established with the help of Russia and high quality tyres were manufactured. Though falling far short of covering the full requirements of the country, there was scope to expand.

In the case ofƒÆ’-¡ƒ”š‚ cocoa, the produce was exported to be used for manufacturing chocolate in Switzerland, Britain, and the USA. Two chocolate factories were established which produced a small portion of the countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s requirements.

Consumer GoodsƒÆ’-¡ƒ”š‚ were generally imported. There was a scarcity during the days of World War II from 1939 to 1945, whenƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ some attempts were made to produce soap, eau de cologne, tooth pasteƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ etc. locally but after the War most of these industries died down, except for a few items like soap, where a local industry developed.

Rice MillingƒÆ’-¡ƒ”š‚ was developed in a manner that created employment and profits for the local entrepreneurs.ƒÆ’-¡ƒ”š‚ With advances in paddy production due to the green revolution,ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ it was necessary to speedily establish rice mills. The Department for Development of Agricultural Marketing was in charge of rice milling. The Department imported a few State of the Art rice mills and installed them in the producer areas of Ambalantota. Amparai. Batticaloa, and Anuradhapura. Next, the Department drafted plansƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ and specifications for establishing rice mills and invited local entrepreneurs who were prepared to invest inƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ establishing rice mills to submit applications. They were selected and guided to establish rice mills and given the necessary foreign exchange for importing the machinery. The rice mills were established under the guidance of the Department and I happened to be one of the Assistant Commissioners in charge of this work in a Province. True to a man the entrepreneurs respondedƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ admirably and established rice mills as required. They were then given allocations of paddy for milling and were paid for milling. This proved a boon for people to invest. In fact, in the Sixties on the road to Galle and Matara from Colombo, if there was a newly built large mansion, it was somehow connected to the riches these entrepreneurs made in rice milling. The beginning of Harischandra Industries was in rice milling.

To produceƒÆ’-¡ƒ”š‚ Paper,ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ a Paper Mill was established at Valachenai in the Batticaloa District, where it was expected that the local coarse grass-illuk, could be used for the pulp with short fibre. The long fibre pulp was to be imported.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ However it was found that the local grass was insufficient and the production halted. Local technicians conducted experiments using straw and found it satisfactory. Straw was brought from as far as Hingurakgoda and Polonnaruwa a hundred miles away. The Paper Mill was a thriving industry. Later another paper Mill was established on the same basis at Embilipitiya.

ƒÆ’-¡ƒ”š‚ In the case of certain industries like Sugar, established at Kantalai,ƒÆ’-¡ƒ”š‚  the machinery had an overcapacity and sufficient quantities of cane were never available. Sugar was produced but the cost was too high. Specialists somehow recommend unnecessarilyƒÆ’-¡ƒ”š‚  large factories. It is a moot thought that they were saboteurs. This is not a farfetched conclusion because even Developed Countries depend on small scale factories in almost every industry.

ƒÆ’-¡ƒ”š‚ Local ƒÆ’-¡ƒ”š‚ production was given a great impetus by theƒÆ’-¡ƒ”š‚ Divisional Development Councils Programme(DDCP) of the Sirimavo Government(1970-1977). Under this Programme a Development Council was established in each Divisional Revenue OfficerƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s area.(Later called Assistant Government Agent and now called Divisional Secretary) The members comprised all village and divisional level officers and representatives of all village level organizations. These Councils were charged with creating employment in the rural areas.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ As stated in the 1970 Budget Speech, the aim wasƒÆ’-¡ƒ”š‚ to fulfill the aspirationsƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ of thousands of young men and women for whom life will lose all meaning unless they can find a useful place in our society.ƒÆ’-¡ƒ”š‚ The Budget Speech of 1973 states:

ƒÆ’-¡ƒ”š‚ The main objective of this ProgrammeƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ is to create employment opportunities in the rural areas through small scale projects in agriculture, industry and the provision of infrastructural facilities, making use of the resources available locally, increase national production and involve the people in national development work.

ƒÆ’-¡ƒ”š‚ A Divisional Development Council was established in each Division. It was chaired by the most senior divisional level officer- the Divisional Revenue Officer of the area.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ A separate Ministry of Plan Implementation was established and Professor H.A.de S. Gunasekera, the eminent professor of economics at the University of Peradeniya was appointed as the Permanent Secretary. In the District the ProgrammeƒÆ’-¡ƒ”š‚ was placed under the Government Agent and he was authorized to deploy any officer under him for this Programme. A Planning Officer was posted to each District and in addition, a number of Graduate Assistants were posted to the Districts and attached to work withƒÆ’-¡ƒ”š‚  the Councils.

ƒÆ’-¡ƒ”š‚ The Councils were expected to enable popular participation.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ As stated by Nilaweera and Peiris,

These councils were expected to enable popular participation in which the elected bodies of the village- the cooperative society, the cultivation committee, the village council could have a role in the planning and coordinating the overall development of the area.(Rural Poverty Alleviation in Sri Lanka:1983)

The Plan was to organize agricultural, industrial, fisheries and other projects.

ƒÆ’-¡ƒ”š‚ The DDCP was imposed on the administrative structure that was already in place in the District. A number of nation building departments had officers at the divisional level and they had their own programmes of work.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ The Rural Development Department had rural development societies that attended to infrastructure development work in the rural areas with the participation of the people.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ The Small Industries Department had Textile and Craft Centres at the rural level with Textile Instructors in charge to provide training in handlooms and other crafts. In addition, there were carpentry schools to train youths in carpentry. These units made furniture for schools etc.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ There was a Department of Agriculture that was in charge of agricultural extension and the Department of Agrarian Services had their cultivation committees to attend to the management of paddy cultivation. The Divisional Development Councils were to create employment within this set up with inputs from all the officers at the divisional level.

ƒÆ’-¡ƒ”š‚ By 1972, the DDCP was implemented island wide. By 1973, 590 Councils were fully established and they had submitted 1900 project proposals of which there wereƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 512 industrial projects. While the Department of Small Industries concentrated on helping and guiding private entrepreneurs to establish small industries, these Development Councils established worker cooperatives to run industries

ƒÆ’-¡ƒ”š‚ A remarkable area of success was inƒÆ’-¡ƒ”š‚ manufacturing farm implements. Basic steel and iron was obtained from scrap and implements such as knives, mammoties and forks of good quality were made. This was built on the local smithy industry that existed from earlier times and there were local people who attended to this as a traditional village industry.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Another successful industry was makingƒÆ’-¡ƒ”š‚ Paper and Cardboard.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ This was based on waste paper and established in Kotmale.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 

ƒÆ’-¡ƒ”š‚ Textile industriesƒÆ’-¡ƒ”š‚ were established in many districts. Garments were stitched and sold through the cooperativeƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ shop network. Another aspect was theƒÆ’-¡ƒ”š‚ Batik and Tie & Dye IndustryƒÆ’-¡ƒ”š‚ where work onƒÆ’-¡ƒ”š‚  various designs was done. There was a good market for batik products specially from tourists. Hitherto the batik dying industry was in the hands of the private sector and there was stiff resistance for any cooperatives to emerge. Despite this drawback batik industries were established and became a success.ƒÆ’-¡ƒ”š‚ 

ƒÆ’-¡ƒ”š‚ An attempt was made to get into the manufacture of new industries on an import substitution basis, which had so far not been done. It was difficult to get approval to make boatsƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ thoughƒÆ’-¡ƒ”š‚  fiberglass boats were being imported. There was a great deal of lobbying against the cooperatives getting into this manufacture.ƒÆ’-¡ƒ”š‚ However, it was approved after a major battle. ƒÆ’-¡ƒ”š‚ A BoatyardƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ was established at Matara where 40 foot long fishing boats with inboard engines were made of wood. The youths were taught to prepare the templates, cut timber to size and assemble them properly to ensure that the boats were water tight. The boats were sold to fisheries cooperatives and immensely benefited the fishing industry. This Boat making Industry was a grand success and fully commercially viable till it was closed downƒÆ’-¡ƒ”š‚ in 1978ƒÆ’-¡ƒ”š‚ by the UNP Government that did not believe in State guided industries.

ƒÆ’-¡ƒ”š‚ AƒÆ’-¡ƒ”š‚ Concrete IndustryƒÆ’-¡ƒ”š‚ making lamp posts and street light posts was established. This industry was a grand success and exists even today.

ƒÆ’-¡ƒ”š‚ A number of Factories were established to makeƒÆ’-¡ƒ”š‚ Roof tiles andƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Bricks.ƒÆ’-¡ƒ”š‚ Sri Lanka wasƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ self sufficient.

ƒÆ’-¡ƒ”š‚ In the rural areas there was ample milk supplies. However, there were noƒÆ’-¡ƒ”š‚ Cheese or Butter Factories.ƒÆ’-¡ƒ”š‚ As the Government Agent of the Matara District I submitted plans to further livestock development in the Deniyaya area and suggested that we should be authorized to establish a small scale factory to make cheese and butter.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ This was vetoed by the Ministry of Plan Implementation on the basis that small scale cheese and butter factories were uneconomical. It was decades later that I cam across a cheese making small industry at Comilla, Bangladesh and also many in Switzerland, making good quality cheese and butter all working on a commercially viable basis. Specialists due to some reason were acting as saboteurs. It was clear that they did not support local development.

ƒÆ’-¡ƒ”š‚ It was very difficult to obtain approval for establishing industries in new areas, despite the fact that the country was importing very large quantities of many items to satisfy consumer demand. The Ministry of Plan Implementation rejectedƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ my application to establish a watercolour paint making industry.ƒÆ’-¡ƒ”š‚ Perhaps, the Ministry was worried that making new initiatives was fraught withƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ failure that had better be avoided. As the Government Agent of the Matara District I on my own initiative decided to establish a new industry and compete with imports. I decided on makingƒÆ’-¡ƒ”š‚ Crayons.ƒÆ’-¡ƒ”š‚  During my service as a Deputy Director of Small Industries I had approved many small industries and was aware of the ingredients that went into the manufacturing and also the process of manufacture of many industries. I was assisted by the District Planning Officer Vetus Fernando, who was a chemistry honours graduate. The initial experiments were done in a room in my residency. I approached the late, Mr. Ariyawansa, the Principal of the Rahula Vidyalaya, the leading school in the District and obtained his approval to use the science laboratory of the school after hours. It did not take long for us to identify theƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  the proportion of each ingredient and the exact process of manufacture. The science teachers of the school were also very helpful, as was the science Inspector Mr Rajapaksa.ƒÆ’-¡ƒ”š‚ This was the Land Grant University System of the USA in action for the first time for the cause of industries in Sri Lanka.ƒÆ’-¡ƒ”š‚ We decided to establish this crayon industry at Deniyaya under the Deniyaya Multipurpose Cooperative Union as a cooperative industry in the same manner as the cooperative powerlooms were run..

ƒÆ’-¡ƒ”š‚ It was a very successful industry declared openƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ by the Minister for Industries, Mr. T.B.Subasinghe. The Industry received an allocation of foreign exchange to import dyes from the Controller of Imports and when the Minister of Trade came to know of the industry, he even wanted us to establish a crayon factory in his electorate in Colombo. Thus began Coop Crayon.ƒÆ’-¡ƒ”š‚  The quality was superb, though handmade. Today many products from China are handmade. This Coop Crayon was sold islandwide and in the years 1972 to 1977 it did provide approximately a tenth or more of the countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s requirements. Easily fifty youths worked on this industry. The president of the Cooperative Union was the Member of Parliament of the area,ƒÆ’-¡ƒ”š‚  Sumanapala Dahanayake under whose direction the industry continued.

ƒÆ’-¡ƒ”š‚ We established this Crayon industry on our own initiative in order to prove to the Ministry of Plan Implementation that import substitution type of industries could be established to compete with imported products.

On the whole a large number of import substitution type of industry came up during this Period. In this method the foreign exchange spent was used in the national interest, employment was created and the country benefited from the manufacture.

Inroads of the IMF -1977 onwards

ƒÆ’-¡ƒ”š‚ The United National Party that won the 1977 General Election decided to follow the dictates of the International Monetary Fund(IMF). The IMF imposed the Structural Adjustment Programme(SAP) policiesƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ on Sri Lanka. This SAP imposed many policies,- high interest- 14% to 24%, the liberalization of imports, removal of restriction on imports, allow foreign exchange for every person for anyƒÆ’-¡ƒ”š‚  purpose, privatize all State commercial ventures, deregulate, meaning that thereafter importers and their salesmen decided what had to be imported, removal of subsidies, devalue the local currency- the sum total of all this meant that the country became totally bankrupt, though that word is never used when referring to a country.

ƒÆ’-¡ƒ”š‚ Following the IMF meant that the Government had to relax all foreign exchange controls and allow all imports. Restrictions for the issue of foreign exchange for travel abroad were also removed and foreign exchange was freely made available. Industrialists were allowed to import anything. Earlier the Government had to balance its foreign exchange budget with earnings from exports and remittances from foreign workers to meet the expenses. Henceforth that was not required. Instead, the Government was asked by the IMF to sell its commercial assets- privatize and fetch money and if that was not sufficient to raise loans. Deficit budgeting was also allowed. In addition in order to help the inroads of imports the tariffs on imports were removed or reduced. The interest rates of bank loans was increased from around 7% to around 20 to 24%. This meant that local entrepreneurs found it difficult to make profits when they had to pay high interest for capital. This paved the way for local industrialists to close down their industries. Imports marched in to take its place.

ƒÆ’-¡ƒ”š‚ The new Government ofƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ the UNP under President Jayawardena, instead of hailing the Crayon Factory at Deniyaya as a success even sent a Deputy Director of Cooperatives Mr N.T.Ariyaratne to inspect and find fault with the industry to indict Mr Dahanayake. However the Deputy Director found a vibrant industry in full order and fully commercially viable and could not find fault with Mr Dahanayake. However with the onslaught of cheap imports this industry was closed down after 1978. This was political sabotage.

ƒÆ’-¡ƒ”š‚ The new Government of President Jayawardena wanted to wipe out all the successes of the earlier Sirimavo Government. Officers who killed themselves at work were victimized and punished. My Assistant Government Agent at Hakmana, Ranjith Wimalaratne, who directed the Hakmana Powerloom of suiting fame had to flee the country and even today he languishes without his pension!.. He worked hard for some fifteen years. I would have been punished if I had been in Service, but I had left in 1973.

ƒÆ’-¡ƒ”š‚ Today Crayloa Crayons from Europe are being sold. Having established the Coop Crayon factory entirely on my own initiative my blood boils even today when I see a pack of Crayola Crayons being sold in Sri Lanka.

ƒÆ’-¡ƒ”š‚ It will be interesting to study a few details of what happened to certain key industries which were earlier established and were a success.

ƒÆ’-¡ƒ”š‚ In the case ofƒÆ’-¡ƒ”š‚ tyres, the Tyre Factory. At Kelaniya, Colombo was privatized and a local entrepreneur who purchased it subsequently sold it to CEAT an Indian Tyre conglomerate. The Tyre Factory was a hard earned industry given to our country by Russia which according to the chief chemist, the late Mr Hector Perera, the key official that established it, could have been utilized to make all the tyres that were required for the country. After the privatization, the role in which the tyre factory was run was not in the national interest; instead it was to make the tyres that CEAT thought best to maximize profits. Thus was lost one of our greatest commercial ventures.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Naturally even today Sri LankaƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ continues to import most of its tyres. Now, the raw material- rubber is mostly exported in its unprocessed form.

ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ In the case of manufacturingƒÆ’-¡ƒ”š‚ Paper,ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ the Valachchenai Factory was closed down due to the LTTE rebellion.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ The Embilipitiya Factory continued till the Government, in around 1997, decided to abolish the import tariff of 10% levied on paper imports.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ When I inquired from some workers I was told that the workers unionƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ protested due to the dust in straw being harmful. In many industries like paper Making, Rice Milling, there will be the problem of dust that has to be tackled with extractor fans etc. At the Ambalantota Rice Mill, I wore a handkerchief over my nose and had a shower at the end of the day. Though an attempt has been made, the Embilipitiya Factory has not yet got into production. Paper manufacture is held within a few multinationals and it is in their interests to ensure that paper industries do not take root away from them.

ƒÆ’-¡ƒ”š‚ What is happening today in Colombo is that waste cardboard is collected, baled and exported to be used for paper manufacture in India. Thereafter the manufactured cardboard is imported back to Sri Lanka. The DDC Paper Mill at Kotmale proved that waste paper could be used to establish small scale paper mills in Sri Lanka. Kotmale is not an area where large quantities of waste paper are available and the success of Kotmale Paper was entirely due to the interest of the Assistant Government Agent . There is ample scope for small scale paper mills to be established in Colombo. Kandy and such conurbations with waste paper as the raw material.

ƒÆ’-¡ƒ”š‚ In the case ofƒÆ’-¡ƒ”š‚ buildingƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ bus bodies and rail coachesƒÆ’-¡ƒ”š‚ which was a highly developed industry in the pre 1978 period bringing about employment for at least five to ten thousand carpenters, fitters and mechanics, the import of fully built busses and lorries was done. What happened is illustrated in the following statistics:

Imports of buses, coaches, lorries and vans and chassis with engines.

YearƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Busses &CoachesƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Lorries & VansƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Chassis&

ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Engines

1978ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  29.2ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 237.0ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 407.4

1979ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 412.0ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 317.8ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  282.5

1980ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 421.2ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 765.4ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  235.3

1981ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 338.4ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 771.0ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  59.3

1982ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 309.7ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 656.6ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 222.5

1983ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 515.7ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 922.6ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 107.3

1984ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 352.4ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 816.6ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  87.2

1985ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 273.9ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 701.6ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  53.6

ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ (Rs.Million)

ƒÆ’-¡ƒ”š‚ In my own words:

ƒÆ’-¡ƒ”š‚ It is seen that from 1978 the import of chassis with engines has been drastically reduced while the import of busses, coaches, lorries and vans has increased. It can be estimated that the cost of a chasis with an engine can be estimated at approximately 30% of the total costƒÆ’-¡ƒ”š‚ of a built up bus, coach, lorry or van. Thus if chassis with engines were imported the cost in terms of foreign exchange would have been 70% less. Local workers would have found employment. In the current situation the local workmen are idle and unemployed. Thus on the one hand the policies followed increased unemployment and on the other handƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ also increased the foreign debt.(From How the IMF Ruined Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚¦)

There is a case to import chasis and build all lorries, vans, buses and rail carraiges in Sri Lanka. An engineer who came to Sri Lanka on holiday was surprised to hear that we imported the Three Wheelers. We need only the engines and a few other specific parts and this is something that can easily be done in an year. If only weƒÆ’-¡ƒ”š‚  make a firm decision on making the Three Wheelers and bus and lorry bodies, we have employment for a few thousands immediately.

Imports do hold the key to employment in any country. In about 1997 upholstery workers lost all work because the Government somehow allowed the import of car and van parts and a large amount of seats were imported.ƒÆ’-¡ƒ”š‚  Welding workers became unemployed because car and van parts were imported in large quantities.

ƒÆ’-¡ƒ”š‚ In the case ofƒÆ’-¡ƒ”š‚ Textiles,ƒÆ’-¡ƒ”š‚ where the country was almost self sufficient, theƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ removal of tariffs and restrictions on imports saw to it that the country was swamped with imported textiles. Gone were the handloom textiles where over 100,000 handloomers lost their jobs because they could not sell their handloom products in the face of cheap imports from Japan and India.

ƒÆ’-¡ƒ”š‚ By 1977, the largest Textile Factory in South Asia had been established at Tulhiriya as a Government controlled venture. President Jayawardena privatized this venture to Kabool of Pakistan. After milking dry the Textile Factory, Kabool raised loans from our banks and left with the booty, leaving unpaid wages, unpaid bank loans, unpaid EPF dues. That has been the history of privatization in Sri Lanka. The present Government has resurrected this industry

ƒÆ’-¡ƒ”š‚ TheƒÆ’-¡ƒ”š‚ Marketing DepartmentƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ activities in the purchase of fruits- with floor prices being offered for pineapples had heralded the country reaching a situation of self sufficiency. This situation was totally altered by the abolition of the Marketing Department and the sale of the Canning Factory under the privatization programme following the SAP of the IMF. With the relaxation of imports foreign jam, food preparations and fruit juice came to be imported in large quantities. As an Assistant Commissioner in the Marketing Department I am aware of the teething difficulties that had to be surmounted in making food preparations and it is sad that this Cannery was totally sacrificed. A good portion of the pineapple crop goes to waste unsold during the season.

ƒÆ’-¡ƒ”š‚ With import liberalization, the import of prepared foods increased rapidly. In about 1970 we imported only Rs. 4 million worth of prepared food. By 1994 we imported Rs. 3.7 billion and today we import easily over Rs. 5 billion worth. This indicates the extent to which employment can be created for local people by manufacturing food products ourselves.ƒÆ’-¡ƒ”š‚  In 2010 the shelves of Supermarkets in Colombo were full of Tomatoe Sauce, Biscuits, noodles, and many items, all from Developed Countries.

ƒÆ’-¡ƒ”š‚ The local industries like making biscuits ran into competition fromƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  cheap imports and had a reduced production

ƒÆ’-¡ƒ”š‚ TheƒÆ’-¡ƒ”š‚ Indo Lanka Free Trade Agreement ofƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 1998, enabledƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Indian imports to swamp Sri Lanka. I was in Sri Lanka at this time and myself saw Indian tradesmen making house to house sales in Colombo carrying joss sticks and stainless steel products. This Agreement saw to it that many of our small industrialists closed their manufactures being unable to compete. Actually what should have happened is for our entrepreneurs to be guided to produce better quality products and to have imposed an import tariff on imports.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Sri Lanka was the net loser.

The Comprehensive Economic Partnership Act(CETA) with India has also taken Sri Lanka for a ride with more Indian products being imported on a credit line, offering our country foreign exchange on credit. Offering credit was the catch to sell their products. In actuality we are creating employment for India while our people remain unemployed. We also increase our foreign debt in the process.

Our imports from India has increased from $ 510 million in 1999 to $600 million by 2000 and to as much as $ 3444 million by 2008, while our exports to India have increased by far less- $ƒÆ’-¡ƒ”š‚  47 million in 1999 to $ 58 million by 2000 and only to $ 418 million by 2008.ƒÆ’-¡ƒ”š‚  Sri Lanka has been the net loser.ƒÆ’-¡ƒ”š‚ 

ƒÆ’-¡ƒ”š‚ It is important to note that every Developed Country in its formative years followed protectionist policies in order to develop their own industries. President George W. Bush when presented with the loss of steel jobs clamped a 30% import tariff on steel imports to save the steel industry in the USA.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ In the case of Britain it is on record that in order to stop the import of muslins and textiles to England from BengalƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ in the colonial days, at first there were Acts of Parliament forbidding the import and the use of imports. When this did not work instructions were given to cut off the fingers of the weavers! That was how priority was given for the development of local industries in England.

ƒÆ’-¡ƒ”š‚ Free Trade Agreements are advantageous to the country that has developed production and manufactures. Unfortunately we have failed both in production as well as manufacture.

In the Post 1978 Period, instead ofƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ concentrating on production Sri Lanka opened upƒÆ’-¡ƒ”š‚ Free Trade Zones, offering facilities for foreign investors to come and invest. As the Government faced a deficit in the foreign exchange budget, any foreign investor bringing money helped the depleted coffers.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Sri Lanka offered a very attractive package of incentives for foreign investors. ThisƒÆ’-¡ƒ”š‚  included tax holidays up to 15 years, 100 % foreign ownership, exemption from personal taxation for expatriates. It is true that employment was created. ByƒÆ’-¡ƒ”š‚ 1991, 85,459 persons were employed in projects of theƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Greater Colombo Economic Commission.ƒÆ’-¡ƒ”š‚ Against this creation of employment one has to consider the number of small entrepreneurs- handloomers, powerloom workers who went out of employment due to the liberalization policies. That number easily amounts to over the employment created. The handloomers thrown out of employment alone amounts to 96,000.

ƒÆ’-¡ƒ”š‚ With the liberalization of imports under the dictates of the IMF and with the increase in interest rates to as much as 20-24% our industries could not compete with imports and closed down causing unemployment.. In the Post 1977 Period as much as 84% to 90% of the raw material was imported for the local industries (UNIDO:Industrial Development Review:25/2/1986)ƒÆ’-¡ƒ”š‚  In the Pre 1977 Period we approved only industries that used an import content of 25% or less. Instead of building up industries in the national interest we came to have the assembly type of industries- where all the ingredients in built up form were imported and assembled together

ƒÆ’-¡ƒ”š‚ We even import roof tiles today!

ƒÆ’-¡ƒ”š‚ An analyisis of the activities of Noritake will illustrate how Japan took Sri Lankan assets for a ride:

They(investors) come in search of assets that are available for exploitation. Noritake came to Sri Lanka on a tax holiday and used ceramic deposits for making porcelainware. When the tax holiday period ended it was extended. It is now realized that the clay deposits are very low. Further it is important to note that working on the tax holiday the investors do not pay any taxes in the country of manufacture;however, they are heavily taxed inƒÆ’-¡ƒ”š‚  their own countries. The porcelainware is shipped to Europe and the USA by Japan and the governments of those countries charge taxes and the traders get profits. Our Government forgets that the resources in the country are exploited to find incomes for investors from foreign countries and foreign governments (From:Success in Development, Godages:2010)

ƒÆ’-¡ƒ”š‚ When the milling of wheat was required the Government of President Jayawardena, ignoring the private sector that performed a yeoman service in the case of Rice Milling, decided to sell the task to a Malaysian Conglomerate Prima, to import the wheat that Sri Lanka required, mill it, sell the bran on its own and hand over the flour to retailers. I had the occasion to question:

Have we not learned a bitter lesson from Prima, the Singaporean FirmƒÆ’-¡ƒ”š‚  that controls our what milling. Prima fixes the price of flour, is in charge of maintaining flour stocks. Its responsibility is seen in the manner it recentlyƒÆ’-¡ƒ”š‚  supposedly sold flour to the Maldives when there was a shortage in Sri Lanka.(From How the IMF Ruined Sri Lanka)

The profits end in Singapore. When we developed rice milling the riches stayed in Sri Lanka.

ƒÆ’-¡ƒ”š‚ The key to creating employment in any context lies in training. To start with the extension staff of the nation building departments have to be experts in their field to guide the people, be it in agriculture or industry. The raw materials required for industries- be it tomatoes, fruits, vegetables, potatoes etc. have all to be produced by us. These are six month crops and can be easily produced.

ƒÆ’-¡ƒ”š‚ Next the entrepreneurs also require training as well as continued technical assistance. All entrepreneurs have to get trained in whatever field they are about to embark on employment and if they do not have a technical knowledge they are very likely to fail. Training to be an entrepreneur is a rear speciality- with detailed studies in economics-the national and local economy- to be able to identify the area where there is a potential for employment to be created. They have to be motivated and be able to get technical assistance and guidance till they are on their feet. The vocational education institutes have to provide an extension service when trainees commence self employment projects. These were the cornerstones of entrepreneur training in the Youth Self Employment Programme of Bangladesh which I designed and established in 1982, which is the premier employment creation programme in the World today.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  Training can be tailormade, short mobile courses targeting specific needs, or a few monthsƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ training. It was my experience that an yearsƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ or a few yearsƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ training does not create entrepreneurs; instead it creates officers. The importance of training cannot be under estimated.

ƒÆ’-¡ƒ”š‚ Efficiency. It is held that the Private Sector is efficient and that the Public Sector is inefficient. This is false. The 2007-2008 economic crash that commenced in the USA was entirely created by the machinations of private sector financial institutions of repute. In the words of Noble laureate, Professor Joseph Stiglitz, the belief that markets work on their own and act with efficiency is simply not true. My research shows that one needed to find a balance between markets, governments, and other institutions including not-for-profit and cooperatives and that the successful countries were those that found that balance.(ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”In Praise of PluralismƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ in People First Economics:New Internationalist:2009)

ƒÆ’-¡ƒ”š‚ The foregoing details of industries developed by us would indicate that import substitution is the method that we have to adopt to bring about employment and alleviate poverty. Many new industries have to be opened up using our resources. We have to manufacture all our rubber products like tyres. We have to march into new fields. One area coming to my mind is to use wood shavings and saw dust, mix it with latex and press them in to make timber board. This is a thriving industry in the USA and in Europe, but we set fire to the saw dust to get rid of it. We do import wood chip doors and wood shaver partitions. Today most of our industries are of theƒÆ’-¡ƒ”š‚  mere assembly type. We have to change this and use local raw materials. The fibre for brushes can easily be made locally. Once I had a shirt made of pineapple fibre bought from the Philippines. It was comfortable and durable. Creating new industries is an endless task and the way ahead is for our industrial institutes to experiment and provide the know how on which we can establish new industries.

Why we have to get out of the IMF Stranglehold

The IMF policy that Sri Lanka followed from 1978 is that the Private Sector is the engine of growth and public sector activities have to be reduced and finally abolished.ƒÆ’-¡ƒ”š‚ After President Jayawardena embraced the IMF in 1978, ending in Sri Lanka becoming an indebted country, we have no alternative other than to follow the dictates of the IMF.

ƒÆ’-¡ƒ”š‚ However, in 2011 JanuaryƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ the UPFA Government has made a scathing attack on the inactivity of the Private Sector. SeniorƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ Minister Mr Sarath Amunugama has saidƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ thatƒÆ’-¡ƒ”š‚ ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-ƒÆ’-¡ƒ”š‚ the private sector is weakƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ and were dead scared to take risks and have not made use of the investment opportunities available.ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚(The Island:27/1/2011) ƒÆ’-¡ƒ”š‚ The Secretary to the Treasury, Mr PB Jayasundera has saidƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ thatƒÆ’-¡ƒ”š‚ ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-exporters have been treated very well with a wide range of tax reliefs, afforded to them by the Government but they have failed to live up to expectationsƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚¦ the Budget of 2011 levies only a 12% tax on exports which enables exporters to make as much as 90% profitƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚(ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”Treasury Secretary Fires back at grumbling exportersƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ :Infolanka:23/1/2011)

ƒÆ’-¡ƒ”š‚ It is sad that both these key figures had failed to understand that the motto of the private sector is makingƒÆ’-¡ƒ”š‚  the maximum profit and not either service to the people or the national interest. While not ignoring the private sector, it is important that the Government takes action to achieve national development goals and within that determine areas for the private sector to play a part like what was done in the case of Rice Milling in the Pre 1977 Period. It is not surprising that the Private Sector avoids taking risks. Today the Private SectorƒÆ’-¡ƒ”š‚  is willing and ever ready to open Supermarkets where profits can be secured within a six month cycle. In my own words:

In Sri Lanka the Private Sector will never function as an engine of growth like in the USA and other Developed Countries. This is because in socialist regimes the Private Sector has been totally decimated. We have very strict housing laws more advantageous to the tenants than to the landlordsƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚¦ we have had compulsory acquisition of land over 50 acres without payment of cash compensation. In the daysƒÆ’-¡ƒ”š‚  of President Premadasa there was compulsory acquisition of land in Colombo without any rhyme or reasonƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚¦.the situation is that the Private SectorƒÆ’-¡ƒ”š‚  only invests to make a fast buck.(From:How the IMF Ruined Sri Lanka

Profits and SalariesƒÆ’-¡ƒ”š‚  The aim of the Private Sector being profit meant that businesses were run to maximize profit. It is well recognized that the salaries of business bureaucrats are very high. In the Golden Key Finance Company the Deputy Chairmen and there were a number of them, drew Rs. 3.5 million plus percs a month. In a small garment factory of around 300 workers, there are at least two executives that draw salaries of Rs. 150,000 per month in addition to a free car, house rent and additional allowances. Comparatively when the Powerlooms were worked by the Government in the Pre 1977 Period, each Powerloom was managed by the Assistant Government Agent who was only paid traveling when he went on powerloom work. This was additional to his work and the Powerloom was also the responsibility of the Government Agent who would interfere if there was a problem for which he did not get paid.ƒÆ’-¡ƒ”š‚  Our jobs would have been at stake if we failed. In the case of the Marketing Department, one of the largest business organizations run by the Government, the Commissioner was a Class I Administrative Officer whose salary and emoluments was less than Rs. 100,000. a month. He controlled an islandwide establishment with a staff of over 2000 in the task of implementing the development infrastructure that ensured that all producers got a fair price and simultaneously consumers got goods at cheap rates. I was his Assistant Commissioner and from morning till evening we were hard at work. The Private Sector equivalent in salary would have easily been twenty times that amount or more. In the Pre 1977 Period the Heads of Departments easily carried their burden as a service- their attention was not for perks and pay, We took the task as a service to the people and at the end of an eight to ten hour day, everyday, the papers that I failed to attend to would be loaded into my car to be looked at after dinner.

In the Pre 1977 Period, the Public Service, directed by political leaders, played a crucial role in national development. It was the Central Bank that decided how foreign exchange had to be used in the national interest. It was the Marketing Department through its Vegetable and Fruit Purchasing and Retailing Scheme that ensured fair prices to all producers, helping the country to expand production, become self sufficient and also enabled an excess of production for the development of industries. This Department also ensured that the cost of living was low because vegetables and fruits were sold keeping a low margin of about 10% for transport costs. Seated in a dingy room inside the dust laden Triploi Market, with a battery of phones on my table I personally fixed the purchase and sales prices for all vegetables and fruits in the entire island in 1957.Those were the days whenƒÆ’-¡ƒ”š‚  Minister Philip Gunawardena knew every detail of what happened at Tripoli as well as everywhere.ƒÆ’-¡ƒ”š‚  I actually ensured that all the traders could not keep fanciful margins as profits.ƒÆ’-¡ƒ”š‚  Take wheat milling today- Prima imports wheat at prices it pleases, mills and fixes the sale price of flour to us. In the Pre 1977 Period the Food Controller purchased wheat flour. When we Assistant Commissioners did rice milling it was we that decided the outturn of rice from paddy milling. It was not a private miller like Prima. A few of us becameƒÆ’-¡ƒ”š‚  experts in rice milling.ƒÆ’-¡ƒ”š‚  Be it agriculture, trade or industry decisions were made by us after careful studyƒÆ’-¡ƒ”š‚  under the guidance of the Ministers. In the Post 1977 Period it was not only our private traders and their salesmen that decided what had to be imported, foreign multinationals depending on what they wanted us to buy coaxed, even bribed us and offered loans to make us buy what we did not need. It is absolutely necessary that the Government of the day makes all the key decisions in the national interest and doesƒÆ’-¡ƒ”š‚  allow the Private Sector to make fantastic profits at the cost of the people.

Another malaise in the Private Sector is the search for profits for non working people. They are the investors who own shares and do no work for the enterprise. Foreign multinationals are clogged with this malaise and closures of paying concerns like famous Edinburgh Crystal and Blue Mountain Pottery in Canada, ventures that ran throughout at a profit are in this category. The profits that were generated could not satisfy the thirst for profit that the owners had. The closure of many Garment Enterprises in Sri Lanka can be traced to this malaise.. A small jerk like the denial of the GPS concessions to our garments caused many Garment Factories to close down. The denial of the GSP only reduced their fantastic profit. They never ran at a loss. This tells us that our Government should have developed mechanisms to take over such concerns and guide them to be in business as cooperatives.

ƒÆ’-¡ƒ”š‚ Believe me, no ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-investorsƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ are coming here to help us in this effort. We have to find a core of private industrialists- the ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-HarischandrasƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ and a few public sector officials of the ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-Kotmale Assistant Government AgentƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚(who made Kotmale paper) type and get them going. There is no other way ahead to create employment.

ƒÆ’-¡ƒ”š‚ To the IMF and the World Bank today, Import Substitution is anathema- they do not advocate it and I would say that this is because if our countries follow import substitution the Developed Countries will not be able to sell their products.

ƒÆ’-¡ƒ”š‚ The IMFƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ is not the only ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”developmentƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ institution that was behind the demise of development in the Third World countries. The IMF worked in unison with the World Bank and the World Trade Organization. The WTO is eternally seeking to tie the Developing Countries to reduceƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚  import tariffs to enable the Developed Countries to sell their products.

ƒÆ’-¡ƒ”š‚ The aim of these three ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-developmentƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ institutions is to take us back a full circle to the colonial days when we produced raw materials and exported them and accepted the manufactured products from them for consumption. The Structural Adjustment policies are aimed to bring about that situation. It is necessary to understand how our economies are being strangled and how more and more money flows out of our countries to the Developed Countries

ƒÆ’-¡ƒ”š‚ The IMF actually crippled development. As Noble Laureate, Professor Jeffery Sachs said of Africa,

ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-The IMF and the World Bank virtually ran the economic policies of the debt ridden continent recommending regimens of budgetary belt tightening technically known as Structural Adjustment ProgramsƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚¦ By the start of the Twenty First Century Africa was poorer than in the late 1960s when the IMF and the World bank had first arrived on the scene, with disease, population growth and environmental degradation spiraling out of control. IMF led austerity has frequently led to riots, coups and the collapse of public services.(From:The End of Poverty)

As Yash Tandon, the former Executive Director of the South Center states:

ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”Africa has become a net importer of food and manufactured products, creating in its wake massive unemployment in the formal sectorƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚(From:People First Economics:2009)

ƒÆ’-¡ƒ”š‚ The demise of employment and prosperity that was caused for development in Sri Lanka by following the tenets of the IMF is akin to what happened to the Philippines. As Professor Walden Bello states:

Thirty years of Structural Adjustment have de-industrialized the country with textile and garment firms reduced from 200 in the 1970s to 10 today. World Trade Organization imposed liberalization has converted the countryƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ from a net food exporting countryƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ into a net food importing one. The main pillar of the economy is now the export of labour with some 10%of the countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s 90 million people working and living outside the country.(ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”DeglobalizationƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ by Bellox; People First Economics:New Internationalist Publications:2009)

ƒÆ’-¡ƒ”š‚ As far as industrialisation is concerned, India ƒÆ’-¡ƒ”š‚ offers a role model, where industries have been constantly developed, with all consumer goods being built locally. India even makes its own tanks and all foreign importsƒÆ’-¡ƒ”š‚  have very high- forbidding tariffs imposed. India did not suffer fromƒÆ’-¡ƒ”š‚  the machinations of the IMF because India ignored the IMF and paid lip service to the calls coming from them, the World Bank and the World Trade Organization.

ƒÆ’-¡ƒ”š‚ The WTO wants the entire Developing World to be opened up for trade to enable the multinationals of the Developed Countries to swoop in and make profits. They all come in on tax holidays and take the profits away.

ƒÆ’-¡ƒ”š‚ Take the case of retail establishments like MacDonalds, Pizza Huts, KFC, that are established in many cities. Initially they come in with dollars that they spend for establishing the retail unit. Thereafter most raw materials that go in for the production including paper cups,ƒÆ’-¡ƒ”š‚  napkins- everything is imported for which the countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s foreign exchange is used. This increases our foreign debt.ƒÆ’-¡ƒ”š‚  Finally the profits are not taxed and leaves the shores. This type of investment is in real terms an exploitation. Governments of Developing Countries have to assess what type of activity is being done by foreign investors. It should be limited to areas that the locals cannot attend to. The Government too has to encourage, draft plans, specifications and provide loans and the infrastructure for the private sector to play their part.

ƒÆ’-¡ƒ”š‚ Countries have to muster up their strength to stand up to the machinations of the IMF, the World Bank and the WTO to tell them that their policies are non developmental. In 1980 the total debt of all Developing Countries was $ 567 billion. Between 1980 and 1992 these countries paid back as much asƒÆ’-¡ƒ”š‚  US $ 1662 billion. (because of the high interest rates). The foreign debt of all countries yet increased to $ 1419 billion by 1992.

ƒÆ’-¡ƒ”š‚ The IMF upgrades countries to enable them to qualify for more loans and this upgrading also means that thereafter the countries are not given any concessional loans. (Sri Lanka isƒÆ’-¡ƒ”š‚  also one of such countries caught up in this stranglehold) It is a shrewd method of charging high interest. In this process the IMF creates profits for the Banks of the Developed Countries. The IMF is not concerned with the fact that our country becomes saddled with additional debt. Since the Structural Adjustment Programme days the aim of the IMF has been to make all Third World Countries indebted.ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ ƒÆ’-¡ƒ”š‚ 

ƒÆ’-¡ƒ”š‚ Following the World Bank and the IMF is not developmental. The IMF belongs to all countries and we have to ensure that the IMF provides a growth strategy, instead of their ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-structural adjustmentƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ policies which really mean structuring our economy to become further and further indebted and bankrupt.

ƒÆ’-¡ƒ”š‚ Even The Wall Street Journal, the epitome of Capitalist Journals ridiculed the growth strategy of the IMF:

The IMF drill is as follows: A Third World poor country with a pegged currency is working towards taming its inflation. Instead of a growth formulae it gets the IMFƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s old austerity dosage which slows down the economy.ƒÆ’-¡ƒ”š‚  The banks begin to falter in paying off their old debts. The IMF recommends yet more medicine- devaluation making the bank predicament and capital flight worse. The currency slumps and the banks are mow in real troubleƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚¦ Is this anyway to run an international monetary system?(Feb22,2001)

Countries have to build up their own homegrown economists who can argue with the IMF and alter their non growth structural adjustment policies to a growth strategy.. Otherwise our countries are doomed!

ƒÆ’-¡ƒ”š‚ Finally it has to be stated that it is the duty of every Government to ensure that there is sufficient production to feed all its citizens and also available at reasonable rates. The production has to be handled in a manner that will create employment for its citizens. Then the riches created in the preparation that goes into manufacturing products stays in the country and provides the people with incomes.. There are saboteurs all along this path, posing as our saviours,ƒÆ’-¡ƒ”š‚  but we have to develop our ability to withstand this force.

ƒÆ’-¡ƒ”š‚ It is hoped that this rambling of my thoughts on how industries were created in specific cases where success was undoubtedly created,ƒÆ’-¡ƒ”š‚  including sad details of where we went on the wrong path, and why it happened, will stand in good stead for the creation of employment and industries in my mother country. Sri Lanka requires the creation of employment and the alleviation of poverty and this is a task that would behove of President Rajapaksa. He is easily the only saviour we have. Ranil Wickremasinghe will sell our country to the foreigners and if it is the JVP we do not know where they will take us!

ƒÆ’-¡ƒ”š‚ May my thoughts help that noble process of development.

ƒÆ’-¡ƒ”š‚ Garvin Karunaratne, Ph.D.(Michigan State University)

Formerly of the SLAS

10 th February 2011

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