The Role of the Public Sector in National Development
Posted on November 20th, 2011

By Garvin Karunaratne, Ph.D.

With the Parliament passing the Act to take over the under performing enterprises that were once privatized, I recall a Paper I wrote earlier which details how the Public Sector once handled enterprises efficiently.

In 2009 I recommended that all garment factories that are on the verge of declaring themselves bankrupt should be taken over. I yet stand by this idea.: In my eyes, any enterprise in Sri Lanka though it rightly belongs to the owner, the latter is also bound to run the enterprise in the national interest- for the creation of employment to the people and to produce what is required for the nation. In that process the owner makes a profit. Though he may be the owner he is not entitled to close down the factory. If he has a problem the Government should help him.

In case the enterprise is yet under performing the Government should adequately compensate the owner and take over. Thereafter it is up to the Government to get going with the enterprise, providing employment and also producing what the country needs.

The question that then comes up is: Can the Government handle commercial establishments efficiently?

The answer is that the Public Sector did handle commercial and all types of development work very efficiently from the Fifties onwards.

The chief officers the Assistant Commissioners, the Commissioners, the Directors. the Government Agents and their Assistants all were adepts in running the commercial and development institutions. The Controller of Foreign Exchange at the Central Bank did do a marvelous job of controlling the use of foreign exchange that came into the country.

Every penny that came in was counted and used in the national interest as determined by the Sovereign Government.

Since 1977 Sri Lanka gave up national planning, gave up the task of accounting the foreign exchange that comes in and allowed the Private Sector and that includes the foreign banks, multinationals and companies to handle the economy. The Public Sector that ran the task of national planning and administering the country was thrown out all due to following the Structural Adjustment Programme of the IMF.

Out goes the aim of serving the people. Comes in the motto of making profit. Serving the people is of secondary or no concern.

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. during the gestation period even when the enterprise was running at a loss. 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 ornaments. 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. I was certain that the Company was making a good profit to the last day. 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 and its non working shareholders. It was Edinburgh and the Scots that lost perhaps their greatest treasure- an enterprise that had contributed to the Scottish economy for over a century. I hope I have now convinced why the Governments should interfere when a private enterprise folds up.

Is there a method out of this?

My mind goes back to my work in the Administratiive Service in Sri Lanka and my consultancy in Bangladesh.

My first appointment was as an Assistant Commissioner for Development of Agricultural Marketing. In charge of the purchase of vegetables and paddy from producers in the Sabaragamuwa, my remit was to ensure that the producers of vegetables and fruits got a price higher than what they got from the traders. Producers brought their produce to the Fairs at Embilipitiya, Colombage Ara and Godakawela. Guided by the Tripoli Market, the Marketing DepartmentƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s Head quarters for the vegetable and fruit purchasing scheme, the Marketing Department had a lorry or two lorries ready to purchase the produce brought by the farmers. The price we purchased was always well above the traderƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s prices. The producers hogged our purchasing lorries and we purchased goods on spot cash. Four days in the week I was motoring down on winding roads to the Fairs at four in the morning. I had to be present to ensure that the Marketing Officers were there in time, had cash and did purchase.

The goods were packed and dispatched by evening to Tripoli Market. I was in charge of the Tripoli Market in 1957. It was one hive of activity from early morning. The vegetables came in- about twenty wagon loads from Bandarawela, Nanu Oya, Kekirawa, Jaffna. And over twenty lorries from places where there were no trains. The goods were received, checked and re dispatched within a few hours to our small shops in Colombo and many other cities. We had over fifty small shops.

When I mentioned this to a cousin of mine in Kohuwela he added that there was a MD shop even in Kohuwela. The Department kept a margin of only ten to fifteen percent to cover transport and wastage in handling while the traders kept over fifty percent. The working of the Marketing Department in the above manner effectively controlled the prices and the traders had to be guided by our prices as otherwise they will be out of business.

This was a unique infrastructure to combat inflation. This Scheme ensured that the traders cannot keep a fat profit. We Assistant Commissioners were always on pins. We decided on the purchasing prices for the entire island and also controlled the consumer retail prices of vegetables in the cities.

The Marketing Department also established a Cannery in 1955 and with that we fixed floor prices for pineapples, red pumpkin and ash pumpkin and turned the pineapple into juice and jam, the red pumpkin into golden melon jam and ash pumpkin into silver melon jam. We not only created employment and income for farmers but also created employment for our people and also produced goods that staved all imports.

There was never a situation like what happened in Hanguranketa about a year ago where farmers built a pandal of tomatoes in protest at not being able to sell their tomatoes. At that time all the Supermarkets were full of Heinz Tomatoes Sauce from USA. Very recently the papers highlighted the plight of farmers who could not sell leeks even at Rs

15 a kilo. In Colombo leeks were the priced at over Rs 80.

Our Commissioner BLW Fernando was a task master. From his room in Chatham Street he effectively gave all of us orders over the phone and kept us on our toes. . On the tenth of every month there was an Assistant CommissionerƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s Conference where the profit and loss sheet for every shop was worked out. We were considered efficient if we could break even or keep the profit or loss within 10%. Otherwise we were hauled over the coals.

The Marketing Department was one of the most efficient departments the one that helped us to keep inflation in check. This was an important method of containing inflation, which is not even understood by our politicians. In the case of imports the purchasing price from abroad partly determines our sales price. The margin that shop keepers and traders keep also causes inflation. The Marketing Department effectively controlled the margin of profit that the middlemen- the traders make.

Another major department was the Land Development Department that made all the buildings of the colonies and built the roads etc. This was done from the days of Prime Minister D.S. Senanayake and our agricultural strength today stems from this work.

. Gone are the days when the Government Agents attended to license guns and act as collectors of revenue. In India the Government Agents are termed as Collectors.

The Government Agents of today handle development work This began in the Fifties with Rural Development and Cottage Industries. Later the Cottage Industries was expanded to Small Industries. 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 from the Powerloom. . 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 Public service was also entrusted with creating employment when the Divisional Development Councils Programme of 1970-1977was implemented. I was in charge of the Matara District in 1971. Many industries were newly established and ran at a profit for the entrepreneur youth to enjoy.

I can 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 LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s requirements during the period 1972 to 1977. This was only one of many industries successfully run under this Programme The Public Service attended to commercial and development work with service as the aim. Profit making was never the criteria. The officers were all paid normal salaries.

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 can come 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..

Herein lies the answer to the ailing garment factories and ailing industries 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 and all sorts of goods that can be produced locally, from foreign countries.

Last week it was reported that there are 40,000 unemployed graduates marching in the South and East. Let me state that some of the graduate trainees that I worked with in Matara were great assets. They were adepts at doing yeoman tasks. One ended up as a Deputy Director of Planning and another ended up as the Secretary of a senior Ministry.

Today many speak of a graduate in History or Languages as a failure.

This is nonsense. Let me tell what our greatest administrators studied for their degree. J.V.Fonseka of the Civil Service, the master that ruled the Land Development Department for long was a graduate in Classics. M.S.Perera graduated in History. Tissa Devendra graduated in English. Recently I ran into a disabled corporal of the army from Dikwella, who had a tale of woe. Two brothers were graduates in Human Resources from Kelaniya and unemployed for the past three years. These unemployed graduates are an asset. Let us hope that the Government will have a scheme to employ all of them and also declare that there will be no more imports of processed food, small industrial goods etc.

and all items that can be made locally. The Government has also to establish the abolished Marketing Department with canneries in Colombo and many districts. The closed down segments of the Department of Small Industries has to be re established. There will be senior officers in the Administrative Service that can get the unemployed graduates on national tasks that will end in creating production. All this can get done through the funds being spent for vocational training today. Self employment has to be added to the curriculum of vocational training.

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.

The unemployed be they graduates or A level or even those with no education are a resource that can be turned into an asset. 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.

Once three decades ago I worked as the Commonwealth Fund Advisor on Youth Development to the Government of Bangladesh. Presented with the problem of unemployed youth I sought approval to enhance vocational education with self employment guidance. This was approved after a major battle because at that time the ILO had tried and failed in a similar attempt. We got down to work- training all youth workers in economics in how to identify areas of the economy that had a potential for employment creation, motivating the youths who were in vocational training to start enterprises and guiding them on a day to day basis till they achieved commercial viability- a type of programme that was unique and never done earlier. Today Bangladeshi Administrators all trained by me are guiding 160,000 youths a year and by 2010 over two million have secured self employment. (For details: Success in


The voice that the Public Sector cannot handle commerce is dead. That was the voice of Professor Milton Friedman, amplified by the IMF in its Structural Adjustment Programme which we have to dump if we are to create employment for our people, alleviate poverty and bring about prosperity. Professor FriedmanƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s ideas of free markets-liberalization-deregulation stand totally discredited today and it died with his recent death. His economic strategies have caused billions in the Third World to suffer in silence. The earlier we understand this fundamental fact, the better for Sri Lanka.

Garvin Karunaratne, former SLAS, Government Agent, Matara District


Author of Success in Development, (Godages) & How the IMF Ruined Sri Lanka(godages) November 20, 2011 gamkga@ao;.com

4 Responses to “The Role of the Public Sector in National Development”

  1. Dilrook Says:

    It is certainly a good move.

    Entreprenuership development is key to success in both private and public sectors.

    World Bank and IMF with their disastrous policies have left this country high and dry. There is nothing to lose now by going against their policies but everything to gain.

  2. nandimitra Says:

    What is lacking in Sri Lanka is good governance. The reason is politicisation of every public institution with inefficient political appointees. Men and women who are capable are excluded . some have moved out of the country all together.Until such time this cancer is cured nothing will work. Honesty and just criticism of the establishment and accountability is the need of the hour.

  3. Christie Says:

    The problems of poerty in Ceylon (Sri Lanka) is the same as that of other tropical countries of the former British Empire in fact British-Indian Empire.
    Those commentators outside Ceylon ought to observe this.
    Those in the country goes for a walk with their eyes and ears to see what they see and hear.

    Well it is time for the economic freedom from the ruthless economic iperialism.

  4. Fran Diaz Says:

    We heartily agree with Dr Karunaratne that the Marketing Dept. MUST be re-established. What a wonderful service the MD provided !

    The Public Sector, according the views of well known Economists, should take control of all Essential Services, particularly in a small country like Sri Lanka, and that includes Food Production & Processing, at least in part. Essential Services cannot be left to the vagaries of the Capitalist System that is usually governed solely by the Profit motive. The trick to running a good Public Sector is to have an excellent local Civil Service. That is how India manages to survive.
    The Private Sector ought to concentrate on production of other goods & services, or supplement the essential services run by government.

    The man made systems of Democracy & the Free Market (Capitalism, Stock & Shares, excessive Profit, etc.) are imperfect. As we are part of these established Systems now via Globalisation, like it or not, we will have to make the best of it. Ideas on how to Survive with Peace & Dignity in a world encompassing such Systems, are welcome.

Leave a Reply

You must be logged in to post a comment.



Copyright © 2024 All Rights Reserved. Powered by Wordpress