The Demise of the Valachchenai Paper Factory marks the Ruin of our Great Industries: What has to be done?
Posted on June 8th, 2014

By Garvin Karunaratne

I was sad to read about the demise of the Valachchenai Paper Factory in the Ceylon  Today of 18 th May. It detailed how the machinery is being sold for scrap.

In fact I was rather surprised to read of this demise because  in August 2012 the Sunday Observer  reported that Valachchenai will soon be resumed to full capacity”, which news filled me with hope..

Again the Sunday Observer of 24 th November 2013 said that a foreign investor was sought.

It is my experience to hear of a foreign investor being involved to be invariably  followed in a few months with a disaster- the sale of the industry as scrap and a final closure- a death knell. For instance when the Embilipitiya Paper Mill was handed over to a foreign investor AusLanka PaperCo for 30 years for Rs 600 million of which only half was paid up they bolted after a few years leaving behind an unpaid bank loan of Rs. 400 million! This was true of the Tulhiriya Textile Mill where the investor bolted leaving an unpaid bank loan and arrears of salary and EPF. Funds.  Sadly we trust these exploiters who come in the guise of ‘investors’. We need investors but we have to take care that they do not exploit us.

It is true that the LTTE manhandled the machinery ay Valachchenai but  it was up to us to reclaim the factory. I admit that it is no easy task to recuperate a factory that is ruined. About five years ago on one of my visits to the Southern Province I visited the former Agrarian Services Rice Mill at Ambalantota, my home for over a full year as Assistant Commissioner. I gazed in amazement at how the rice milling machinery, which we carefully cared for,  had been pulled to bits and even the Mill Premises had been parceled out. I could not believe my eyes as to what had happened to the Rice Mill that worked 24 hours a day for six days of the week and at that time in the Fifties and Sixties it was a state of the art rice mill. Rice Milling was a successful industry and this and many other State run commercial ventures were completely ruined by the sale/privatization policies of the United National Party under President Jayawardena under the advice of the IMF. Now(1/6) I hear that Prima has increased the price of wheat flour. Who gave Prima the right to import wheat. It was President Jayawardena that decided to hand over wheat milling to Prima. They were authorized to buy the wheat and decide the sale price to us. Earlier it was a Deputy Food Controller that bought wheat flour. Now the profits in wheat milling go out of Sri Lanka and giving Prima the right to buy wheat flour is not in the national interest. Yet once the multinationals are entrenched it is they that call the shots.

To get back to Valachchenai, my attachment came in a strange manner. When I worked at Head Office in the Agrarian Services in 1961-62 and again in 1965 to 1967, I went on circuit to Batticaloa and Amparai very often and  a telephone call to Valachchenai Mill brought me a cosy room in their Circuit Bungalow. I had several times gone through the working of the Mill, the paddy straw being washed and being made into pulp and the Paper being manufactured.

Then on many a day motoring in my Peugeot 203, I happen to be trailing lorries laden with straw all the way from Polonnaruwa to Valachchenai. At that time I saw it as a nuisance because I had to trail behind them being unable to overtake. Now in my incessant travels all over the world I have had to trail behind lorries laden with sugar cane in Thailand and India and manioc in Thailand. I have trailed behind truckloads of wheat straw(hay)being transported vast distances in Prince Edward Island and many other places in Canada, the UK and Europe.It was a nuisance to us motorists, but then it brought money to the farmers-to  farmers in Polonnaruwa and Hingurakgoda. Valachchenai produced quality paper. The short fibre of the paddy straw was mixed with a small proportion of imported paper pulp from wood which had the long fibre to add strength to the paper.

The Valachchenai Paper Mill was originally meant to turn out the illuk grass in the dry zone to paper pulp.  After installation we ran out of Illuk grass and it was due to the ingenuinity of Sri lankan  engineers that we adapted the machinery to use paddy straw. At that time in the Fifties paddy straw was not used and once our engineers did that trick there was no stopping till the LTTE debacle.

It may be of interest to note that now straw is being used in India, Canada, America  and China  to make paper pulp out of paddy straw. None of them were making paper out of straw in the Fifties. In other words those countries are now benefiting  from the spade work done by our great engineers.. Isn’t it sad that our ingenuity is not allowed to flower now

The grand success at  Valachchenai made us establish a second Paper Mill at Embilipitiya. This was run efficiently and commercially sound till the late Nineteen Nineties, when it started.  When there were some teething  problems. I made inquiries from a worker at Embilipitiya whom I met at their sales deport at Union Place in about 1998. He told me that the major problem was the dust in the straw. Dust is there in many industries. In the Rice Mill at Ambalantota when I was in charge I had to work on some days in the dust for a full day with an handkerchief tied  around my nostrils and end the day with a shower. The answer to that was a few extractor fans. At that time an import tariff of 10% was levied on paper imports and President Kumaranatunge removed this tax favouring the multinationals and Embilipitiya Paper breathed its last. In the infancy of all industries the industries have been helped in every country, which we forget when multinationals approach and influence us!

To my thinking the demise of the Paper Mill sounds meddling by multinationals who  are engaged in manufacturing paper and who will not hesitate to sabotage any attempt made to ruin their manufacture and trade. This is evident in many industries today.  In the Dairy Industry too, the multinationals hold sway.  In my own words written in 1999, ‘the managing director of Kiriya, a company that was trying to make Sri Lanka self sufficient in  milk production has said that he suspects  a foreign hand in sabotaging his attempts at developing local production’(From:How the IMF Ruined Sri Lanka(Godages)

In the early Seventies the Assistant Government Agent at Kotmale started a paper making industry at Kotmale under the Divisional Development Councils Programme.  This fell a prey to the Free Market Economics of President Jayawardena. Today in Colombo one of the main industries is the collection of waste paper and cardboard- not a stray lorry load but 8.000 tons are exported every month to India and we buy back paper and cardoard from them. Great economics for our arm chair doctrinaire economists to talk and write.

It is time that our Ministry of Industries opened its eyes and if those eyes are closed it is time that our President takes charge. If he could have delivered peace in a country that was torn with LTTE bombs and attacks somewhere almost every day, surely he should wave his magic wand in favour of our people to find them employment and also to save foreign exchange.

Someone has to order the Industrial Development Board to come up with the basic machinery to make paper pulp out of straw and straw paper making industries have to be established in the areas where the straw is found in plenty. Then attached to those paper pulp machines should be cardboard and paper making units. Farmers even burn the straw to get rid of it today. In the Sixties if I remember right the Valachenai Paper Mill paid some fifty or eighty rupees for a lorry load of straw from Polonnaruwa. Judging from the reception I got as the G.A. Matara one cannot expect any service from our Industrial Development Board. I wanted to establish a water colour paint making industry and sought them to draft a Feasibility Report. It took months of flogging and finally they drafted a report which they fed to a private industrialist before sending it to me. The Ministry of Plan Implementation rejected my proposal due to the negative orientation in that Report.

That ended my dealings with the IDB. A few months later I decided to teach both the IDB and the Ministry a lesson. I took charge of the Rahula College Science lab after  school hours and commenced experiments to make crayons. My leading officer was Vetus Fernando my Planning Officer, a raw chemistry graduate aided by the School science teachers.  When we got stuck half way, I  dispatched Vetus to the Chemistry Department of the University of Colombo where he went on his bended knees to his professors who trained him only a year ago to get help in the chemistry labs that had sophisticated equipment and personnel who had been trained abroad, to be chased away. We continued undeterred in our school lab at Rahula. In two to three months we came by success and established a hand made crayon factory  at Deniyaya.  It was called Coop Crayon and established by Sumanapala Dahanayake, the Member of Parliament who happened to be the President of the Multipurpose Cooperative Union. T.B.Subasingha the Minister for Industries was surprised to see the product and he came to open up sales and the sales covered the entire island from 1972 to 1978 till the free economy of President Jayawardena killed it.  The moment the Minister for Trade Mr Illangaratne saw the crayons he wanted me to establish a factory in Kolonnawa, which request I managed to dodge. This crayon factory fell a prey to free imports and also to the free economics of President Jayawardena who did not want the State to handle any commercial undertakings- the IMF doctrine of depending on the Private Sector as the engine of growth.

This same demise also happened to the Canning Factory of the Marketing Department established in the early Fifties which made our country self sufficient in fruit juices and jam. The free economy of President Jayawardena privatized it and now we import fruit juice from the USA. I have suggested again and again that we establish  small canneries at Tissamaharama,  Anuradhapura and Gampaha(for pineapples), but my request has so far fallen on deaf ears. The cost of the machinery in foreign exchange is within what we today spend to get down fruit juice in a single year. I can guarantee anyone that fruit juice factories can easily be done. I hold experience as I was associated  with the Marketing Department cannery for around five years in its infant stage..

We are celebrating  not victories but the demise of Valachchenai, of the Canning Factory that once worked. It was due to the false economics of the IMF that the UNP followed that all this demise happened. Unfortunately we have not yet got out of the clutches of the IMF that dictate us to depend on the Private Sector, confining  our engineers and administrators to the barracks. Imagine where we would be today  if our armed forces were locked up in barracks!

A great deal has to be done in industry,  Mexico imports some $ 60 million  worth of Cinnamon from us every year and use it to make cinnamon extract and use it in food preparations and sell it all over the world. We even import Vanilla powder of inferior quality. A tin of Vanilla Powder purchased from the importer at Slave Island was thrown away by me because I found it adulterated. We grow and can expand on growing vanilla but we have resigned ourselves to NATO- No Action Talk Only. The way ahead is to marshall all our resources including schools. The school science curriculum should include making paper pulp from straw and making food preparations from local produce.

But shall our leaders close their eyes to this wanton damage to our economy. It is time our leaders opened their eyes. The way ahead to employment creation as well as savings in foreign exchange lies in the development of small industry.

Garvin Karunaratne
Former Government Agent, Marata District.
6 th June 2014

3 Responses to “The Demise of the Valachchenai Paper Factory marks the Ruin of our Great Industries: What has to be done?”

  1. douglas Says:

    I remember the days when Valachchenai and Embilipitiya paper mills were in operation, how the people made a living by collecting old news papers and other street refuse from the houses and streets. This helped to keep the environment clean as well as to collect an extra income from the waste.

    As the writer very correctly stated, all that “entrepreneurial ingenuity” was KILLED by the short sighted and corrupted leadership of the country. This happened to some of the small scale, village based enterprises, such as the “Hand Loom” industry. The responsibility for such a demise must be borne by both the political as well as the social leadership. Our people were not oriented to value the “home grown” products and be proud partners of our own achievements. On the other hand, the people who managed the policy initiatives too were short sighted, in that, the sudden dearth and scarcity created by banning imports without resorting to curbs in a slow pace created an atmosphere of contempt and disgust by the public. There were no “Quality Control” mechanisms in place, with the result the consumer “apathy” was heightened to the level of rejecting the products totally. A good example was the manufacture of “Shaving Blades” – remember the “Good Morning” shaving blade. Those days, it was priced gift to get a “willkinson” blade hidden in a letter from abroad. So goes with the manufacture of “Pencils” and “Rubber Erasers” in a country were graphite, soft wood and rubber are available in plenty. This list can be very large and space does not permit to pen down those here.

    So the question is: how we can get back to be on our feet? We need a well balanced political and social leadership who are committed to make us self helped through “Genuine Example” and “Education and Motivation” to produce quality products for day to day use. With the present day life styles introduced to the market by the authorities persuaded by the “Big Industrial Giants”; it will no doubt be an uphill task. Yet it is worth trying, starting with small scale enterprises.

  2. Lorenzo Says:

    We destroy our own paper factory and get Endia to build a coal power plant and damn provincial councils!

    What fools are we.

    Anagarika Dharmapala was SO CORRECT.

    “But shall our leaders close their eyes to this wanton damage to our economy. It is time our leaders opened their eyes.”

    Our leaders with OPEN EYES did this damage. Sad but true. Should we still pin hopes in this RUINED SYSTEM to save SL?

    MOST of us commenting here don’t because they have FLOWN to greener pastures. I pity SLs left in SL.

  3. Mr. Bernard Wijeyasingha Says:

    Good article that focused on certain industries to make a point. That point being that Multinationals by their nature are not bound by sovereign territories, they are “Multi national”. The owe no allegiance to any nation but only to their stock holders and their Executives. Decisions are made based on profits for the company and not for the nation of origin or the targeted nation. Welcome to the world of Multinationals. They are ruthless by nature for they have to be in order to compete with similar entities like them.

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