Our policy has to be Import Substitution with the motto “Buy Sri Lankan” to achieve the Vista of Splendour, our President’s aim.
Posted on January 12th, 2021

Garvin Karunaratne, PhD in Non-Formal Education & Agricultural Economics, Michigan State University Formerly of the SLAS- Government Agent, Matara in 1971-1973. 

A Country that is saddled with a massive unsustainable foreign debt- as much as $ 56 billion, the servicing of which requires some $ 4 billion annually, where the outlay required for imports far outweighs the value that can be realized from exports, where the normal inflow of dollars from Middle East workers has ceased,  has the only option of import substitution to enable its people to find employment and incomes on the one hand and to reduce the commitment on imports.

If Import Substitution is done in a systematic manner there will be employment for its people, incomes for them as well as increases in production that can stave off imports.  Buy Sri Lankan has to be the motto.

This model of development- creating the production required within our own country thereby creating employment and incomes in not new to Sri Lanka. It was the model of development that was successfully followed till 1977 when the IMF implanted its Structural Adjustment Programme, which stifled development, changed our policies to create a foreign debt on one hand and made us depend more on imports.

Recently our Central Bank has, at last, realized that following the IMF’s Structural Adjustment Programme has ruined our economy and caused our country to pile up foreign debt. (SundayTimes:20/12/2020)

 It is also important to note that the IMF in 1978 made us abolish the development infrastructure that we had carefully built up since our country became independent. This was the infrastructure that was to enable our peasant farmers to increase their incomes and to enable people to open up industries and become employed.  This infrastructure comprised the following:

  1. The Vegetable and Fruit Purchasing Scheme of the Marketing Department, whereby vegetables and fruits were purchased at the producer fairs at prices above what was offered by traders, brought overnight to the cities and sold at rock bottom prices keeping a margin of only some 15% for wastage and transport and keeping no profit. This was how we ensured the low prices of vegetables and fruits- thus effectively controlling inflation. 
  2. The Marketing Department Cannery which within the three years 1955 to 1957 made Sri Lanka self-sufficient in all jam, fruit juice and food preparations like tomato sauce. May I note that we have been importing tomatoes sauce and vinegar till now? When I served in Nuwara Eliya I used to buy a carload of tomatoes from Hanguranketa and my home was made into a week-end cannery when we turned out tomato sauce sufficient for six months.  
  3. We had a programme of handlooms and power looms in the rural areas which turned out elegant sarees and textiles. Then our elite did not go to Singapore searching for exquisite sarees. Instead, they went to meet the Textile Demonstrators and told them to turn out bespoke sarees of their design.  This Programme was done by the Small Industries Department that imported yarn and distributed to the units. There were over 100,000 handlooms hard at work. The expertise was provided by a Research and Help Unit at Velona, Moratuwa. I was a Deputy Director of Small Industries in 1970 
  4. Under the Divisional Development Councils Programme, we established many import substitution type of industries. The Divisional Secretary at Kotmale made paper and cardboard out of waste paper. In my District, Matara, I established a Mechanized Boatyard making seaworthy boats which were sold to cooperatives and this increased the fishing fleet. This mechanized boatyard was set up by us within some three months. We also established a Handmade Crayon Factory making crayons equal to the quality of Reeves crayons.  It took three months of experiments locked up in the science lab at Rahula College every night to find the art of making crayons and it took three weeks for Sumanapala Dahanayake, the Member of Parliament at Deniyaya who was also the President of the Morawak Korale Coop Union to establish it working on a 24-hour basis.  Many other small scale industries like making tools and small agricultural farms were established.  

    All these very valuable programmes and more which brought about employment to our people, incomes for them and also stopped imports were all abolished by the Jayawardena government under the advice of the IMF. 
  5. The policy of indigenous production was very successful except for the period 1973 to 1977 when the Government of Sri Lanka faced sanctions from Western Governments and Multinationals. The policies of land take over and the imposition of socialist policies caused the imposition of sanctions by Western Developed Countries.  The USA decided that flour was no longer to be made available under the PL480 Scheme. We had to pay in full for flour. This caused a scarcity of flour as we did not have the finances.  The multinational shippers also charged more for our freight. The prices of imports were skyrocketed by multinationals to punish our country. The cost of imported rice increased from Rs 1015.00 to Rs. 2639.00 per long ton in 1974,  The price of imported sugar increased from Rs.  3093.00 to Rs. 5486.00 per long ton and the cost of flour increased from Rs 1386.00 to Rs 2124.00 per ton(Central Bank: Annual Report:1974(From How the IMF Ruined Sri Lanka(2006) 

 In addition, the British Government insisted that we should pay them hard cash for the value of estates over 50 acres that were taken over. These financial commitments had to be faced and it is commendable that the Sirimavo- Dr NM Perera combination Governments managed to face the commitments without allowing the country to fall into foreign debt. At the end of 1976, the foreign debt was only $ 75 million. It needs to be mentioned that despite this onslaught on Sri Lanka by the Superpowers Sri Lanka could boast of having a plus $ 58 million and $ 117 million in its foreign exchange balance of payments in  1976 and 1977.  It is important to note that ever since 1978 our balance of payments has  escalated in the  negative, increasing  from $ -177 million in 1979  to as much as
 441 million in 1983. (How the IMF Ruined Sri Lanka: 2006, page 49)

In my Papers published over the past few years, I have highlighted the possibility of establishing small scale industries with a view to enabling employment opportunities and thereby increasing the incomes of people. Simultaneously the industries will enable import substitution- that we can minimise imports  The Government has already restricted imports and it is imperative that the Government takes action to set up industries.

Among the industries I have identified as suitable for immediate implementation are: 

1 Paper Making. 

Papermaking is not new to Sri Lanka. We have had two major Plants at Valachchenai and Embilipitiya which were very successful. The former was destroyed during the insurrection of the LTTE while the latter was mismanaged. During the Divisional Development Programme days-1970-1977), a small scale Paper Factory was successfully implemented at Kotmale. It is to the credit of our President that after a lapse of some four decades the Valachena Paper Factory has been restarted.  

Today we export as much as 8000 tons of cardboard to India per month .and we also buy from India paper and cardboard. It is said that we collect our waste paper and export it to India and buyback paper and cardboard from them. Perhaps Sri Lanka is the only country in the world that does not have a plant making paper out of waste paper 

We can easily make Paper and cardboard in Sri Lanka. During the time the Valachenai factory was functioning it purchased straw from as far as Hingurakgoda. I was a frequent visitor using their Circuit Bungalow on my circuits and have been shown their machinery. 

It is suggested that we get down a few small scale paper and cardboard making machinery from either China or India and establish these in our colonization schemes. These will use straw and waste cardboard as the raw material. I have also pointed out that Illuk grows wild in Mahavillachchiya and a Paper Factory can easily be set up there.  Making paper and cardboard is a cottage industry in India and Bangladesh.

This is an industry that can be easily established within a few months and will create employment and incomes and also reduce our imports of Paper and cardboard. 

May I suggest that a few paper factories be established within two months? It could take on the following form: 

  1. An Administrative Officer from SLAS and a Mechanical Engineer to he handpicked and sent to India to see, study and identify small scale machinery for  making paper,  
  2. Ordering a few papers making Units to be purchased and brought to Sri Lanka. 
  3. Suitable land to be identified immediately and the State Engineering Corporation or the Engineering Co of the Army to be requested to put up a temporary structure to house the factory. 
  4. Selection of youths to work on the factory.  
  5. A Project Manager with an engineering background preferably an engineering graduate to be recruited to be in charge of the project.  
  6. The Project is to be worked as a cooperative which will be owned both by the workers as well as the community. This concept of Community Cooperatives is key to ensure that the cooperative is not moved away from the community. 
    Paper manufacturing units can be easily established. There is absolutely no doubt. 

Making Large Boats 

At Matara, I established a Mechanized Boatyard making large 40-foot inboard motorboats, within three months. This included building a large shed to house the factory, installation of machinery, and making boats that were sold to fishery coops. . This was a beginning of a successful small scale industry established under the DDC Programme of 1971-1973. This industry also suffered the same fate of closure at the hands of President Jayawardena. In 1978. 

Similar Boatyards can easily be established within a few months. This will bring employment to youths and also enable more boats for fishing.   

It will not be a difficult task to get going to establish a Boatyard within two months. 

Making Jam and Fruit Juice and Canning Fruits 

I worked as an Assistant Commissioner in the Marketing Department and was associated with the establishment of the Cannery. Within the three years- 1955 to 1957, this Cannery successfully produced all the jam and fruit Juice that the country needed. The raw material was Pineapple which was made into jam, Pieces and Slices and we established exports too.  As much as 8 % of the production of pineapple products were exported.  The other raw material was Red Pumpkin which was made into Golden Mellon Jam. Ash Pumpkin was made into Silver Mellon Jam. Oranges were made into Juice. The Marketing Department was able to fix floor prices for any amount of Pineapple, Red Pumpkin, Ash Pumpkin and Oranges and the producers – Chena cultivators also made high incomes.  

It is possible to establish a few small scale Fruit and Vegetable Processing Plants in a few areas where fruits are available in plenty. I would suggest Canning Plants at Anuradhapura, Naula, Tissamaharama, Kandy and Gampaha.  

The expertise to establish these canneries is available locally. 

Mangoes are plenty during the season.  

If four Small Scale Canning Plants are established we can become self-sufficient in Fruit Juice and Jam within two years. 

If approved it will not be difficult to establish a Cannery within two months.  

Perfume Making

This is a more difficult task, but something that can be done. Today we import a range of perfumes. 

 On my travels, I came across a small scale perfume-making distilling machinery at Corris Industrial Unit in Wales. If I had known of this machinery when I served as the G.A. at Matara I would have somehow got down a mini distillery and would have established a perfume making factory based on the flowers offered to the Matara Bodhi.  As did happen to the Crayon Factory. which I established in 1970 this would have been abandoned by the Jayawardena Government in 1978.  I am not suggesting a Crayon factory because I am not certain whether we can find the art of making Crayons.

May I suggest that small scale distillery machinery be immediately obtained and perfume making be established at  Anuradhapura, Kandy and Kelaniya. The raw material will be the flowers that are offered at the temples.

This will be a new industry and initially experiments will have to be done at the Industrial Development Board . In the alternative may I suggest that making perfumes out of flowers be initiated at a few Central School Science labs. This will lead to establishing a Perfume Making Industry.

Once long ago when I visited India I was told to go to Sugandhika and buy some perfumes. I did go to their sales outlet and admired their different perfumes. I was shocked to learn that they have no fixed factory. Instead they have a few small portable factories that are temporarily put into action wherever they find flowers. Here we flow in flowers at temples and spend a massive amount to get rid of it.

Once a Programme gets going more items can get produced.

I make these suggestions and am confident of success. 

I can speak with authority because I have already established small scale industries. To detail-I got my Planning Officer at Matara to find the art of making Crayons- which took three months of experiments at the Rahula College, Matara Science Lab. Then I got the Member of Parliament Sumanapala Dahanayake in his capacity as the President of the Coop Union at Morawaka to establish a Hand made Crayon factory. This was established working day and night within three weeks. The sales were opened by Minister of Industries. Both Ministers Subasinghe and Illangaratne were amazed at the quality of the Crayons. The Crayon factory had islandwide sales by 1977 when it was closed down.

I can also speak with authority on employment creation, because 

I also designed and established the Youth Self Employment Programme of Bangladesh in 1982 when I worked in Bangladesh as a consultant. I defied the Secretary to the Treasury of Bangladesh, when he, quoting the failure of the ILO in establishing a self-employment programme insisted that it would be a waste of funds. The ILO incurred a massive loss and failed to establish a self-employment programme in Tangail, Bangladesh.  I had to argue with him for over two hours and won the day. The  Hon Minister for Labour and Manpower approved my request and I was ordered to establish a Youth Self Employment Programme, I designed and established a programme and also trained the staff of youth officers and youth deputy directors to continue with it after my two-year consultancy ended. Today this Youth Self Employment Programme is the premier employment creation programme the world has known and has guided over three million youths to become self-employed by 2020. Anyone interested is requested to contact the Ministry of Youth Development that yet runs this Self Employment Programme. A Youth Development Department that was totally doing youth work now spends 95% of its time and money to train and guide youths to be self-employed as entrepreneurs, making items that are required for the country.

As Sri Lanka is today a cash strapped country, it may be of interest to note that this above mentioned Self Employment Programme was established and worked for the first four years without a budget. My altercation with the Secretary to the Treasury, the officer who held the purse strings meant that he refused to fund because he said he was certain that my attempt will be a failure. I said I needed no additional funds but added that I will find savings within approved budgets to do the extension work and asked for authority to change the remits of officers. This was granted and for the first four years, the Programme was met from savings. Ultimately the Secretary to the Treasury had to eat his words and document my Self Employment Programme in eight full pages in the Five Year Plan 1990-1995 of the Planning Commission of Bangladesh.

I can assure the Government of Sri Lanka that we can make a breakthrough in employment creation and poverty alleviation and also increase production, obviating imports by establishing many small scale industries within one to two years. . . 

Garvin Karunaratne, PhD in Non-Formal Education & Agricultural Economics, Michigan State University Formerly of the SLAS- Government Agent, Matara in 1971-1973. 

Author of  How the IMF Ruined Sri Lanka & Alternative Programmes of Success, Godages, 2006 

How the IMF Sabotaged Third World Development, Godages/Kindle, 2017 

10th January 2021

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