The GSP Plus Fiasco: Are We That Helpless?
Posted on June 2nd, 2010

By Garvin Karunaratne, Ph.D.(Michigan State University)

It is reported that finally the European Union(EU) has rejected our overtures and has decided to withhold granting the GSP Concessions to Sri Lanka. In fact a writer in the Sunday Island has even gone to the extent of stating that the Government should enlist the services of Ranil Wickremasinghe to lead a delegation to lick the boots of the EU.
It is said that the EU was actually hoping that the United National Party(UNP) would be victorious at the elections and that the Government should lick the boots of Ranil Wickremasinghe, the leader of the UNP to win over the EU. It was rumoured that the EU threat of canceling the GSP Plus Concessions was a lever to gain votes at the elections for the UNP. What a sad conspiracy to garner votes when in actuality the elections should have been fought on principles.

I cannot speak for the Government but as far as I can guage the Rajapaksa Government will not be of the type that will lick the boots of either Ranil Wickremasinghe or the EU and sacrifice our sovereignty.

It will be a good ideal for the two political parties to work together on issues of national importance but the unpatriotic manner in which the UNP has conducted itself influencing the international community and this includes the EU against the Government to win the elections indicates that the UNP has to perhaps shed its unpatriotic leaders and emerge as a force in the national interest if it is to gain any credibility with either the people or the Government.

To the Rajapaksa Government that has already achieved the task of annihilating the LTTE force of terror, a task that had defied many Governments earlier, the task of facing the withdrawal of GSP Concessions will be far easier.

It is true that the withdrawal of the GSP Concession will mean that our exports will not be given tariff preference. In other words our exports will have to face more competition and not get tariff preference. There will be less profits for the Garment Manufacturers.

The GSP Concessions were first granted to Sri Lanka after the Tsunami of 2005. Then the tariff preference was for 7,000 products to enter the EU on a tax free basis. Without tax concessions Sri Lankan products would have been 10% higher in price. The question is how can this loss of 10% be contained? It is a well known fact that the garment workers hardly benefited from the GSP. It is a well known fact that garment workers get paid very low wages and there was no considerable increase with the arrival of the GSP Concessions. In other words it was the management and the owners that benefitted.

Since 1977, the Private Sector has had a hey day. The owners and the management have been drawing fantastic salaries and perks. In the Golden Key Company some eight Deputy Chairmen are alleged to have drawn Rupees three thousand a month plus perks. In a garment factory known to me the management comprised the owner and a CEO both of whom drew salaries of one hundred and fifty thousand, plus a house and a car per month. They drew unlimited petrol etc. No wonder the factory closed down.

The Owners and the higher managers drawing high profits and high salaries has been the order of the day not only in Sri Lanka.

In my travels in Canada in 2005, I wanted to see Blue Mountain Pottery, a pottery that turned out exquisite items that were sold by elite shops like Harrords and Selfridges in London. . I found that it had closed down making over fifty workers unemployed. I met some of them and a sales staff that were selling the products that were left. The owner was so nasty that he had destroyed the moulds. This was a very special pottery that had mastered the art of giving a high glaze on pottery- the type of glaze that is normally done on bone china. This was the best pottery in entire Canada. The workers were real specialists on the job and their answers to my searching questions revealed that the factory ran at a profit, though not as fantastic a profit to satisfy the hunger and thirst of the owner. Thus the masterpiece pottery, the greatest in Canada was lost in 2005. It was a great loss to the economy of Canada.

Back to Edinburgh, my home for a decade, I frequently visited the Edinburgh Crystal Factory where I had personally on several occasions admired their master craftsmen at work blowing glass and carving them.

I used to take my community members and youths on trips as I was then an officer in Community Education. There were hundreds of workers and the work had so expanded that the Company was even getting items made abroad. To the last day I was certain that the Company was making a good profit. The company was sold out to another crystal factory and the factory at Edinburgh was closed. The machinery was taken away, the skilled workers were fed to the social security dole queues, all because the profits though it poured in could not satisfy the hunger and thirst of the owner. It was Edinburgh and the Scots that lost perhaps their greatest enterprise- an enterprise that had contributed to the Scottish economy for over a century.

Is there a method

My mind goes back to my work in the Small Industries Department and as the Government Agent of Matara. At Hakmana, in the Matara District, we had a Powerloom Cooperative, which turned out the best quality textiles- textiles that could easily match the best quality available for sale in the UK. There was a huge demand for Hakmana suiting material and people from Sri Lanka who had migrated to the UK whenever they came on holiday would come in search of Hakmana suiting. This Power loom was managed by leading members of the community and it was headed for long by the Divisional Revenue Officer at Hakmana, Ranjith Wimalaratna, who did not draw a cent as a salary. It was a part of his onerous duties being in charge of the area. He guided the entire powerloom cooperative. As the Government Agent, the officer in charge of the District I became concerned when any of the powerlooms ran into difficulties and then I would spend some time to trouble shoot and sort out the mess. I did not get paid for that task because that fell to me in addition to my duties.

Was this Hakmana Powerloom industry a one and an only factory? No every District had a number of poerloom industries- established in the Sixties with Chinese Aid by the Small Industries Department that had a special Deputy Director in charge of arranging suppilies of yarn etc and also attending to the infrastructure that was necessary for powerlooms to function. The Department had a Unit at Velona which would guide the powerlooms on all technical matters. As the Government Agent at Matara we ran at least three powerlooms and Hakmana was one of them.

Earlier at Kegalla I had around four powerlooms and all ran well under the same management pattern.

Cooperative industries, run by the community members, under the guidance of government officers- the Government Agents of the Districts and his Assistant Government Agents in the Divisions did perform a yeoman service in textile manufacture in the pre 1977 period. They also ran the handloom industry where handloomers worked in their homes turning out sarees and handwoven textiles. The Cooperative Union and the Small Industry Department shops- the Lak Sala sold the sarees done by the handloomers. In this manner by the Seventies Sri Lanka was almost self sufficient in all its textile requirements.

The Cooperatives at Sandalankawa in the Kurunegala District is also a show piece for anyone that thinks that cooperatives cannot be a success.

I can also quote the success of the Coop Crayon Industry at Deniyaya, established in 1972 by the Deniyaya Cooperative Union which was fully commercially viable within six months of its establishment and which turned out a tenth of Sri Lanka’s requirements during the period 1972 to 1977.

Using this experience it is not a difficult task to attend to garment factories that are closing down. The Government has to take over all closing down garment factories and run them as cooperatives, run by the workers and members of the communities. The Government has to provide the infrastructure that is necessary. The technical aspects have to be done by a Department like the Small industries of the pre 1977 period by a Deputy Director heading a task force, finding orders and guiding the production. The administrative guidance came from the Government Agent and the Assistant Government Agents of the Divisions.

An important premise of this type of industry is that it is a community cooperative a cooperative that is run by the community where the workers are also members of the community. The aim of this community cooperative is to enable production that the people need at a reasonable price, bring about employment to the people. The aim is not profit making, though a small profit is aimed at to ensure that there is no loss to the Government. It would be ideal for the profits of these industries to be fed to a fund for the development of cooperative industries- that would be a final aim.

Herein lies the answer to the ailing garment factories in Sri Lanka.

The Government need not be frightened to handle this responsibility, because within its own Administrative Service ranks there are able officers who can manage these tasks. They have a history of managing enterprises and they can be entrusted with this task. The Government has to provide the infrastructure, ban the import of garments from countries like Indonesia and India and get going.

If the Government vacillates in decision making it will be like the fate of the Blue Mountain Pottery in Canada, the Edinburgh Crystal and the Coop Crayon in Deniyaya. As I once wrote when I see a pack of crayola crayons on sale in Sri lanka today, my blood boils and I am for a moment lost in nostalgia, reflecting on the employment that was once created for the youths in Deniyaya and the profits that flowed to the Deniyaya Cooperative Union, the profits that today flow to the shareholders of Crayola Crayon in the UK and Germany.

There is no need to go on bended knees to anyone any more.

Garvin Karunaratne.

Formerly of the Sri Lanka Administrative Service, 2/6/2010 .

4 Responses to “The GSP Plus Fiasco: Are We That Helpless?”

  1. Siri Says:

    This is a very interesting letter. However you have omitted to mention why we do not have these industries today. Who is responsible for this ? Is it several different individuals or the Polical party that came into power at the time. It will take some explaining on your part to sell this idea to the present misiters who will have to decide on it’s merits. Was it due to poor quality that was unable to compete in the open market, or unsuitable materials being used. Please explain what made these industries disappear.

  2. orpheusperera Says:

    In my opinion these industries did not just disappear. They were killed slowly by the people who did not believe in corporative system and listening to foreign economic advisers, who were allowed to decide what, is good for our country. It was not only the textile industry that has disappeared. Even the centuries old furniture industry was destroyed, by the imports. People who can afford prefer to buy imported products than our own products, unlike majority of rich people in India.
    All the school children, from primary school need to vow the ligancy to the country, every morning and to give the Sri Lankan products the priority , when doing shopping.
    Following is an example of the promise, that can be used in English medium schools:- “
    “I am proud of being a Sri Lankan. All the children living in all the parts of the country are my brothers and sisters. I vow to protect the country and our national interests”.
    I have witnessed an attempt to kill the Chemical Industries to facilitate the import of Caustic Soda from Apartheid South Africa in nineteen eighties. A certain Business lady, a batch mate of Lalith Athulahtmudali ,who has met a South African Business guy had this bright idea. They were ready to bribe the young production manager to slow down the production and tell the minister that the Paranthan Chemical plant cannot meet the countries demand for Caustic Soda. Fortunately for the country, the young Production manager was afraid to get involved in such un-patriotic deals. How many such industrial slaying has taken place, for personal economic gains, is a mystery.
    Most of the supporters of Rail thinks that our country can prosper by following the west. We can do so if we can employ slaves in agriculture, like America did four hundred years ago, capture some African countries and dig for diamond copper and gold and bring them back to Colombo, Intimidate the Arabs and get petroleum for next to nothing.
    As far as the garment industries are concerned, they were done with the help of American advisers and people such as Upali Wijewardane. This attracted village girls to free trade zones who had to work more than one shift per day to earn a living. Now these companies who provide materials and do the marketing found cheaper labour markets in India, Bangladesh and Vietnam. They are gradually closing down the garment Industries in Sri Lanka, leaving the locals who became experts in this industry in limbo status. UNP should, at least now, realise, that foreign companies are here to make big profits, not agencies disseminate foreign aid. Sri Lankan high fliers should also know that buy copying the American way of life, they are destroying the country and the environment. We can’t afford to do so as a country.

  3. Fran Diaz Says:

    Many thanks to Gavin Karunaratne for this article. We too strongly believe that the Co-op System is very good for Lanka. It should be applied not only to the garment industry but also to other spheres of human need. I have seen co-op housing schemes work very well in Montreal, Quebec. When workers own an industry or a property, it is looked after with great care, unlike in the profit motivated industries & property, where resentment & envy may flourish, and Managers have to constantly use the ”carrot & stick” to get the work done. I am not against well run private enterprises which take care of their workers with some kindness.
    May I suggest that a certain percentage of earned income of each Co-op be retained by the Co-op for emergencies or even bonus payments.
    Co-ops & Employee Owned Enterprises is the way to go for the Developing countries.

    Here is an extract from the Net on the most success worker owned enterprises in America :

    According to, “The recently released list of top 100 companies by Fortune magazine shows that employee owned companies in the U.S. are becoming more prominent. Approximately 14% of the companies on the 2009 list are employee owned.
    Based on the success of employee owned companies, what is noticeable is that the companies provide the most desirable working conditions for employees. Governments around the world should take a good look at this business model to reignite the engines of growth. Based on the list below, this business model is applicable in all sectors of the economy.

    For the list of America’s Largest Majority Employee-Owned Companies, kindly visit the link below:

    Given below are the top companies worker owned enterprises in America :

    Company City State Industry Plan Employees

    Publix Super Markets Lakeland FL supermarkets stock purchase, ESOP No. of Employees 144,000
    Hy-Vee W. Des Moines IA supermarkets 401(k)/ profit sharing Employees 55,000
    Price Chopper Schenectady NY supermarkets 401(k) Employees 24,000
    Lifetouch Eden Prairie MN photography studios ESOP Employees 22,175
    Nypro Clinton MA plastics mfr. ESOP Employees 18,000
    Daymon Worldwide Stamford CT food distribution ESOP Employees 17,360
    Houchens Industries Bowling Green KY supermarkets & other svcs. ESOP Employees 16,826
    WinCo Foods Boise ID supermarkets ESOP Employees 13,000
    Parsons Corp. Pasadena CA engrng., const. ESOP Employees 11,500
    Amsted Industries Chicago IL indus. mfr. ESOP Employees 9,600
    Black & Veatch Overland Park KS engineering ESOP Employees 9,600

  4. sena Says:

    One of the main group that is responsible for our desperation for hand outs like GSP+ is those who benefited from higher education. The public invested their hard earned money in higher education to see evolution of knowledge based economy. But more than sixty years in running higher education has very little impact on our economy. In fact the professionals rely on poor peole productivity for their pay check. Let us take different industries – one of the biggest is healthcare, but we do not have anything to show, sadly doctors spend their time in backyard garages rather than developing world class treatment and research facilities like in India and and in the process demeaning the value of SL medical degrees. Scientists are no better, recently in was revealed that several countries have developed drugs from indegenous plants. If we take engineering profession it is the same. Most are languishing in offices doing paper work. Nothing in financial sector either. It is high time for these professionals to become creative and take SL to a knowledge based economy and show some return for the public faith in them

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