Import Substitution is the way to rejuvenate our economy
Posted on December 21st, 2019

By Garvin Karunaratne

It is heartening to note that our new Government is taking action to stop the import of items that we can easily make. This has commenced with kites, wesak lanterns, jos sticks and palm oil.

This Import Substitution is to my thinking the only certain method of rejuvenating our economy. If we make our own items then by stopping imports we can definitely gain by saving  the foreign exchange that we use for imports and also be certain of finding employment for our own people. This means income- poverty alleviation.

Today, import substitution is the only development method available to the Government.  Tourism, touted to bring incomes only helps employment creation. Tourism does not bring in foreign exchange as most tourists cash dollars at private dealers and the intake  of dollars does not get into Government coffers. Only bank intakes get into Government coffers. Further hotel bookings  are mainly done through the internet where the hotelier is paid in Rupees but has to pay at least 15% and this goes out through a bank in our foreign exchange.  Under FDI(foreign direct investment) too we incurr a loss of foreign exchange as they(Pizza Hut, Uber etc) trade in Rupees but repatriate their profits in our foreign exchange. Then there are the investors in water, power etc. who trade in Rupees by providing power, water etc. but take away profits in our foreign exchange. All this leaves Import Substitution as the only method to rejuvenate Sri Lanka.

Five decades ago, when I as the Government Agent at Matara,   established the Crayon Factory at Morawaka., Harry Guneratne the Controller of Imports was  happy to give us some foreign exchange to import dyes, the only item in the ingredients that went into the making of crayons, and he slashed the import of crayons. Coop Crayon  established under my direction by Sumanapala Dahanayake, the Member of Parliament for Deniyaya in his capacity as the President of the Morawaka Coop Union, was able to have islandwide sales.  Our country saved foreign exchange as well as found employment for over a hundred youths from Morawaka. That was instead of our providing employment for workers in foreign countries and profits for foreign multinationals.

It would behove our new Government to consider  the creation of a major programme of import substitution in the coming Throne Speech. The last such major programme was the Divisional Development Councils Programme of Premier Sirimavo as far back as 1970. After that it was all welfare grants. We failed to teach people to fish. Instead we were providing fish.

Import Substitution is nothing new to us. Coop Crayon was equal in quality to the Crayola crayons of today. Five decades ago it was Reeves and when fine tuning the Coop Crayon to get it equal to Reeves crayons  I was beside Vetus Fernando, my Planning Officer  the chemistry grad who unearthed the method of making it at the Rahula College Science Lab at Matara. It was the culmination of a myriad of attempts at making the crayon for three  long months every working day from six to midnight.

Let me tell anyone that if we can make crayons there is absolutely nothing that we import that we cannot make ourselves. Let our chemistry grads (They are today on the roads agitating for employment) and science teachers  do that task. I am told that the science lab at Anuradhapura Central is far more equipped than at Rahula College.  That tells me of what our science teachers can achieve if put to that task. They need leaders to give them the GO AHEAD for that task.


Let us look at other things that we did achieve ourselves. At Matara after a fierce battle with both the Ministry of Plan Implementation and the Director of Fisheries who were objecting to my establishing a Boat Making Cooperative at Matara, I won the day, and  established a Boatyard making 30 foot long seaworthy fishing boats. We made 30 to 40 boats a year and provided them to Fishery Cooperatives. That was  a feather in the cap of the Divisional Development Councils Programme of 1971-1977. Now that Boatyard is no more, closed down by the Jayawardena Government under the instruction of the IMF and we continue to import fish.

At Matara we established a smithy making tools . That smithy is yet there, worked by people who find it hard to find the scrap metal. In the meantime I have seen knives made as far as Mexico for sale in our Supermarkets. We do sell our scrap metal to India. We have to develop our Smithys. Today if one wants a fine knife one has to get it from the Smithy at Kotmale.  Is it not sad that we sell our scrap metal to India instead of developing our own Smithys.

Once four decades ago we made paper out of straw at Valachenai.  The machinery was intended to make paper out of illuk and when the stock of illuk ran out it was our scientists that found the art of making paper out of straw. Then with success we established a second paper factory at Embilipitiya. The Tigers ate the Valachenai Factory and mismanagement ate  Embilipitiya.  In its hey day the farmers at Hingurakgoda and Polonnaruwa made money by selling their straw to Valachenai.  I used the Paper Factory Circuit Bungalow for my stay on circuit and became familiar with the paper making process. Under the Divisional Development Councils Programme a Paper Factory was established in Kotmale.  That was also a real success, There paper was made from waste paper.. Many countries recycle waste paper into paper but not Sri Lanka. When I addressed hundreds of youths in Bangladesh on my never ending seminars  to goad them to commence self employment ventures, we provided them with lunch and the paper cartons that contained their lunch was carefully collected by youths who had paper making small factories. We do sell our used Cardboard to India-some seventy tons a month and buy back cardboard from them. It is sad that we do not make any paper now. China and India make paper from straw. They copied the art of using straw to make paper from our Valachenai scientists.

Let me wish the new Government luck in import substitution. The way ahead to my thinking  lies in the establishment of a Ministry for Employment Creation through industries and agro industries under the Hon Prime Minister, because the activities cuts across several ministries and the task will not be successful due to the fact that Ministries will not cooperate. My experience is that Ministries want to shine themselves and never cooperate. . Minister Philip Gunawardena established our  Industrial Development Board, staffed with able scientists, which should take the initiative but in 1971 they were never cooperative with my initiatives- they always blocked my path to establish industries which made me go entirely solo helped only  by my Planning Officer and the Science Teachers at Rahula in the making of Coop Crayon. They were the only scientists I had.

Let us take textiles. The Small Industries Department(once I worked there as a Deputy Director) imported yarn and distributed it to textile factories, to the powerlooms and handloomers. By 1970 we were self sufficient in textiles. At Matara as the GA I managed five powerlooms, run as cooperatives and the Divisional Secretaries were in charge. These were very successfully run and my Hakmana Powerloom made suiting that was in high demand even in London.

. Our country does not need massive factories that take years to establish and they devour the raw material within a few years. That is the history of the Plywood Factory at Avissawella and the Sugar Factories at Kantalai and many more.

It is adviseable to go for small scale machinery that can be established in a Divisional Secretaries area. There are plenty of small scale paper factories in India and China. Similarly there are many small scale food processing factories. We do have plenty of fruits to make juice and jam. The administrators who can establish these units till they are on their feet  are today  wasting their time in SLAS jobs and the scientists are in limbo as science teachers. They can be enlisted within a flash like what I did at Coop Crayon.

Based on my experience in industry in Sri Lanka I can make a firm statement that we can easily succeed in establishing the following industries to ward off imports and also create employment

1. Paper Making. Import a few paper making small scale factories from India and have them installed in the colony areas where there is plenty of straw., I can venture to state that a few Paper Making Factories can be established within three months and these can recoup the foreign exchange incurred to import the machines within a year or two.

2. Fruit Juice and Jam Making can be successfully established. Once the Marketing Department(MD) had a Cannery which was privatized. I worked in MD for over five years. When the MD ran this Cannery we purchased all the Red Pumpkin, Ash Pumpkin, Pineapple, Tomatoes  and Melon we could find and made them into Jam and Juice. Producers, mainly chena cultivators made good money. Today we import all these items. We can be self sufficient in all our Jam, Juice and items like Tomatoes Sauce within two years and this will offer employment for hundreds and also save foreign exchange.

3. Boatyards can easily be established within three months and these boats will help us to stop fish imports.

4. Import bus and lorry chassis and get going with making buses and lorries.. Today we have a stray carpenter labouring to make a lorry on a chassis.  This is an area where we can easily succeed.

5. Once recently I needed a step ladder and surveyed Nawala to find one made in Sri Lanka.  I found that we make less than   ten percent of our step ladders. . Making step ladders is a far easier task than  either Paper or Fruit Juice Making.  Judging with the speed we worked at Matara in 1971-1973, we can make all our step ladders within three months..

May these ideas reach the eyes and ears of our leaders. I have quoted instances of how we did things ourselves, so there is no danger of going wrong causing a waste of funds. That is why I have not included crayons. All what I have suggested is far easier than making crayons.

These thoughts come to you from a son of Mother Lanka who established the Youth Self Employment Programme in Bangladesh when he worked there as the Commonwealth Fund Advisor to the Ministry of Labour and Manpower in 1981 to 1983, a task where the ILO had failed in the earlier three years. My task was to design and establish the programme and train the officers to continue it. I had to challenge the ILO and the ILO had to eat humble pie when I succeeded. This Programme of employment creation had guided two million youths to become self employed by 2011 and guides 160,000 youths a year currently. It is a programme of employment creation that has withstood the sands of time.

All what I have said can be achieved. Every idea in this paper has been proved to the hilt. The success of Coop Crayon in 1971-1977 tells anyone that we do have within us patriotic  politicians, administrators and science teachers that can do that job. In Morawaka we established the Coop Crayon Factory in a record two weeks time working on a 24 hour basis. We do have the ability if called upon to have some industries going within two to three months.  We did work that fast then.

It is upto our leaders to go ahead.

Garvin Karunaratne,
Ph.D. Michigan State University former GA Matara,20 th December 2019.

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