Sugath Kulatunga

In January I wrote on FB that I would take up the genesis of the EDB. But other than in bits of anecdotes where I dealt with a few salient developments of the institutional history I had not attempted a comprehensive cover of the fascinating story which is given below.

When the Additional Director General of the Export Promotion Secretariat (EPS) Shelton Fernando joined the ITC as a consultant, I who held the post of Director Trade Information was promoted to that post. One of the first suggestions that I made to Dr.Ratwatthe was that we should propose a separate Ministry of export development. He endorsed the idea strongly and we carried out a SWOT exercise on the EPS and prepared a report justifying the proposal. In the EPS itself there was some reservation on the notion of a national and an inter-the Ministerial endeavor which was considered the function of national planning, and should be under the Ministry Of Planning. Fortunately, my research done in the TIS was useful in overcoming internal misgivings and I prepared a comprehensive proposal for a Ministry of Export Development. This proposal became the underpinning for the subsequent proposal for the Export Development Bill. EPS had sponsored a team to visit Shannon in Ireland to study their free trade zone and has already prepared a report for a free trade Zone. On the eve of the Parliamentary elections of 1977, Dr.Ratwatthe presented the two reports to both Mrs. Bandaranayake and J.R.Jayawardene.

In the 1977 General Election the UNP won with an overwhelming majority. The UNP had before them the two proposals on Trade and Investment both initiated by the Export Promotion Secretariat. The UNP had more confidence in FDI and introduced the Greater Colombo Economic Commission (GCEC) to give access to robber barons”. Director General of the EPS Sivali Ratwatte was appointed as the Director Investment in the GCEC and the EPS acted as the nucleus of the GCEC. I was promoted to take the place of Dr Ratwatte as the Director General of the EPS. A few of my contributions to the GCEC were the identification of functions and the development of an organizational structure, identifying the land for acquisition for both Katunayake and Biyagama zones, conducting the first Trade and Investment promotion in New York and inviting the UNIDO to provide technical assistance.

When JR Jayawardhane became the President of the country the EPS was attached to the Presidential Secretariat. I had the opportunity to develop a close relationship with the Secretary to the President genial Mr.Menikdevela. In fact, he and General Sepala Atygala, Lakshman Hewawasam and I made a regular foursome at lunch at the Senate restaurant.

Meanwhile my friend Gaya Cumaratunga who was the Additional Secretary to the Ministry of Trade has proposed to the new inister that the EPS should be brought under the Ministry of Trade. One day I had a surprise telephone call from the Minister Athulathmudali. When I answered the call, he asked me whether I remembered what I told him when he came canvasing to which I answered of course Sir, I remember the event well and said, I am more convinced now of that statement” He then invited me to come and see him in the office and gave me a time the next morning. What I told him that day when he came canvasing was a very frank and impromptu statement. It was a hot and humid day when I was seated bare bodied in the Verandah of our house in Sirimal Uyana Ratmalana. To my embarrassment a noisy group of about 20 people entered our garden led by a well-built person. He introduced himself as Lalith Athulathmudali who was contesting the Ratmalana seat. I had not met him before but I knew his background and qualifications as I had planned to invite him as a guest lecturer to the Academy of Administrative Studies where I was working at that time. But my boss Shelton wanted me to think twice as the then Minister Felix Dias may not have been happy with that. I was keen to get rid of the milling crowd of supporters and told Lalith very tersely that he need not waste his time in our place as my father-in-law had voted against the UNP only once and that was to Colvin as he thought he should be in the Parliament. I then said that I had never voted for the UNP and I was working with the brother of Mrs. Bandaranayake but I and my wife have decided to vote for him for the same reason and also because he was a presidential prospective. He was somewhat surprised with my blunt statement and left after thanking me.

Next morning, I went to meet the Minister when I saw about 10 people waiting to see him. But the moment I announced my arrival he called me in and we had a very informal chat for over one hour. I asked him why he took to politics he said that he was impressed with the vision of JR for the country. I mentioned my experience with politicians and said that it is not a pleasant a career and one tends to make enemies. To that the Minister replied that he was determined to engage only in clean politics and would not criticize opponents personally but attack their policies. I gave him the paper we had prepared on a Ministry of Export Development. He glanced it and asked me to explain the rationale which I did. He said that he agrees with the proposal, but it was too late now, but we could propose an independent authority like the GCEC. He then laughed and said he will sponsor it provided the EPS is part of the Ministry of Trade. I then suggested that we invite Victor Santiapllai of the ITC to advise us. He not only agreed to that he said he will invite Victor to head the new organization. I excused myself after the long chat as there were so many people to see him.

I came back and reported to Mr.Menikdiwela the conversation I had with Lalith. He was not happy of the EPS moving to the Ministry of Trade. He said that if EPS remains with the President there was no need for a large organization and all that the EPS could be achieved better under the President. I had to make a critical decision. Remaining with the President I could have personally gained many perks like an official vehicle which Sivali enjoyed. But I looked at the issue from an organizational theory point of view which was one of my favorite teaching subjects at the Academy. The country needed a permanent institution with the responsibility and the capacity to address the problem of export development. It could not be done with and ad hoc agency like the EPS with spartan human and financial resources. As the former Director of Trade Information, I had access to information on the developments in other countries and also the literature on the subject of agencies like the World Bank. More than anything else I had confidence in the ability and the dynamism of Lalith. I knew that he was to speak to the President on assigning the EPS to the Ministry of Trade but not to support Secretary to the President objecting to it.

I spoke to Victor in Geneva and briefed him on the developments and invited him to visit SL as soon as possible. He was aware of our proposal for a Ministry and was delighted with the new development. Within a few days he came to Colombo with his new Deputy Alexander who was the former Secretary Trade and Commerce in Indian Central government. Alexander was tasked to prepare the cabinet paper for approval. He did not look at our proposal for an export development ministry. Nor did he consult me or Sivali. He made a proposal which had the traditional Trade Promotion approach. Once the Cabinet approved the proposal, The Minister wanted me to draft the framework of a bill to be presented to the Legal Draughtman. I told him that I would like to go beyond the proposals in the Cabinet Paper and gave him the reasons. I insisted that what we require is not trade promotion but export development. He agreed that we need not confine ourselves on what is in the Cabinet Paper which is only an approval in principle. He laughed and said that when the Bill was presented, he will explain to the Cabinet that was his new thinking. I requested him to permit me to communicate directly with the Legal Draughtman on behalf of the Ministry. He agreed readily and said he will speak to Secretary Lakshman de Mel. After that I set aside the Alexander Cabinet paper and went back to the original EPS proposal where we had identified the key elements which should be in an export development institution. These were cleared in one-to-one discussions with the Minister who was most receptive.

I explained to the Minister that if the task before the country trade promotion was as envisaged in the Cabinet paper that could be done by the Department of Commerce with its representative in the key markets. I explained that 75% of our exports consist of the 3 commodities of Tea, Rubber and Coconut which are also exported in primary form. Export Development would encompass supply development and diversification and adding value to the present products. The argument which was also in the Cabinet paper that it should be a national effort with pollical backing was concretized with a specific proposal to form a Council of Export Development Ministers presided over by the President. The management Board (the term Board was the preference of Victor) was to consist of all the Ministries responsible for the production or servicing of exports and the private sector representatives.

I was very keen that the EDB should be financially sound and independent. As the Secretary to the Treasury was to be a Board Member further dependence on the Treasury was uncalled for. I followed the example of the Tea Board and included a provision for a Cess which was a major deviation from the Alexander proposal.

One serious lacuna in the investment capital portfolio of the country was the absence of a venture capital capacity. In many countries pioneering industries have been funded with either direct grants from the state or with venture capital. This too was not in the cabinet paper. There were few other details which were included anew in the new proposals such as the power to create subsidiary organizations, to acquire shares in export ventures and invest in export ventures, to undertake feasibility studies in export projects, to register exporters, and to establish Advisory Committees on products and functions.

This was a time that planning was considered a useless function especially by the Ministry of Finance and took some convincing to include as a key responsibility of the EDB to formulate a National Export Development plan. Once the new paper was finalized, I formatted it into the standard format of a Bill.

The next task was to get the Bill drawn up by the Legal Draughtman (LD). The standard procedure was to present the approved cabinet paper to the LD and request him to frame it into the legal format. Our new proposal was very different from the Alexzander proposal approved by the cabinet. When I pointed out the discrepancy the Minister told me not to send the Cabinet approved proposal but to send my draft Bill and mention that it has been drawn up in accordance with the approved Cabinet paper in principle with a a few amplifications approved by him. He also asked me to request the LD to speak to him if necessary.

I did not go to the LD but met the Additional LD, G.de. Silva who was a colleague of mine at Arunachalam Hall in Peradeniya. He also knew my wife who was an Assistant Secretary in the Ministry of Justice. I had no problem of sharing my anxieties and the urgency in getting the Bill approved in Parliament. His response was that his department cannot have an argument with Minister Athulathmudali who was a distinguished lawyer. He looked at my draft and said that it makes life easier for his officers and assigned an experienced but more amenable officer (Mr. X) to take charge. At my request he also instructed him to deal directly with me and in case of any problem to consult him. X and I sat together and completed the task within a few weeks. When there was any issue where he had any doubt, I used to suggest that we speak to my The Minister which made him refrain from asking for further clarification.

Moot point- provision on secondment

Once the task was completed, I thanked my friend the ADLD. He congratulated me and Mr.X and said that was one of the fastest drafting of a Bill by the Dept. I said it was because he agreed for me to communicate directly with the LD department without the intermediation of the Ministry of Trade. In fact, if the Minister did not agree to my working directly with the LD there would have been a long delay and some of the provisions in the Bill would have been different. The lesson was that if one is keen to get a job done one has to stand one’s ground.

When the Bill was sent for observations there were no worthwhile comments. I was nervous on the Ministry of Finance position on the Cess. I had to debate the issue with the Secretary of Finance, who was fortunately a friend of mine when we were a team under Anil during the good old days of the CTB. I said if the EDB did not have independent and adequate funds it will be ineffective.

The Bill was tabled in Parliament and the Minister an early date to debate the EDB Bill and the Bill on Intellectual Property. I was surprised when he called me and asked me to draft his speech in Parliament on the Bill. When I showed some reluctance he said, you better defend your Bill”. I prepared his speech making reference to the historical importance of international trade in Sri Lanka and the current poor performance when compared with other Asian countries and making a strong case for export development. The Minister was impressed, and he said that he had nothing more to add but would only read my draft in Parliament.

 On the day of the debate, I had the privilege of occupying the official box in the House with Lakshman Kadirgamar who had come from Geneva to witness the Intellectual Property Law introduced in Sri Lanka. At the time he was the Deputy Head of WIPRO. The Bill on IP law was taken up first and was passed without any division. (Frankly I was skeptical on introducing a strict IP law in the country at our stage of development. I told the Minister that the developing countries have exploited us with impunity so far and we should make use of their intellectual achievements without obstruction. His answer was we cannot expect any FDI without IP protection.) Then it was teatime and the Minister invited me to have tea with him where he asked me whether there was any thing more to add. I said that we should have included the development of Rural Exports as a function of the EDB. He was very enthusiastic on my suggestion and said that he would ensure that it is included at the Committee Stage.

But what happened in Parliament thereafter was in bad taste. Before presenting the EDB BILL he referred casually to an accusation made by Anura Bandaranayake about an individual recruited to the Port who did not have any qualifications and was only a henchman. The Minister retorted that the individual had all the qualifications required and in a lighter vein said that the member must be careful as he was a good shot. I noticed distinctly that Premadasa who was sitting next prompting Lalith as he was finishing his comments and the Minister ended up saying and not an offshot”. This was a malicious slander spread by Anura’s fraternity by his mean enemies. As the Minister sat down the House went into a howl of laughter. The Minister’s speech introducing the Bill was dignified and consummate. Many members spoke in acclamation and supporting the proposal.  But with the excitement of the offshot comment the Minister forgot to add the rural export development as a function of the EDB at the committee stage which much later I pushed through export production villages. I happened to see the Minister next morning. He said that he was very sorry about the remark made in Parliament which was in the spur-of-the-moment and prompted by Premadasa. I told him that I saw what happened. He reminded me of what he told me at my fist meeting with him that he would not attack opponent on policy and never personally. He also said he would apologize to Anura. I said he should be careful with Premadasa who could be nasty.

A third party had insisted on Victor the Chairman designate, that he should be both Chairman and CEO. He had spoken to the Minister who had agreed. I had followed the proven example in the Tea Board and Tourist Board of separating the functions of the CEO and the Chairman of the Board and making the DG the CEO. I also believed a Chairman like Victor Santiapllai should not be burdened with the management functions of a CEO. The experience and the ability of such a chairman should be on Policies and external relations with the Ministers and private sector leaders. My main argument was that a DG would have both the technical and management expertise but on a future date a chairman appointed on a political basis would not have both. I also told the Minister that I have seen the General Manager of the CTB seated outside the Board room waiting to be called inside only when he was needed. I went on to say that I believe that I could contribute more than any appointed member to the Board, and I would not like to undergo the indignity of sitting outside the Board room and would prefer to go back to the SLAS. The Minister did not expect this blunt response from me and was silent for a few minutes. Then he said he will make me both DG and Secretary to the Board and with a mischievous grin he added that a smart secretary could make Board decisions nuanced to his thinking. I had no options but to agree with him. But this arrangement made me work in two distinctly separate posts without additional remuneration which I could have insisted on. Anyhow I was willing to be in the EDB and work with Victor in any capacity.

Although I argued with the Minister on a matter of principle, I did not have serious objection to the Chairman being the CEO as well, as I had included in the ACT in article 9 for the Board to form committees which could be delegated all the powers of the Board. The main committee thus established named the FAC was empowered to decide on all financial and administrative matters. This was enshrined in the ACT with my experience in the CTB and of Oils and Fats Corporation where Board members were happy to spend their time on trivial establishment an administrative matter presented to the Board, I was convinced that EDB Board should only deal with export development policies. This was more valid for a stellar Chairman.

FAC was a novel feature where all decisions were taken on FAC papers where the approval had to be  justified. This gave all staff members who wanted a decision made the discipline of justifying the request. This also kept a record of the background to the decision for future reference.

All FAC minutes were submitted to the Board for information. Once a Secretary of a Ministry who had an axe to grind demanded that all FAC papers should be submitted to the Board for approval. At the next meeting I submitted about 50 FAC papers together with around 10 regular Board papers. All the members including the member who wanted FAC papers to be submitted to the Board was quite embarrassed and decided that the Board did not want to deal with FAC papers.

In making pivotal decisions my rapport with the Secretary Finance (Tikka) was very helpful. He was one who read the Board papers thoroughly before attending the meeting. Tikka used to come at least half an hour before the meeting and ask for clarifications and point out the negatives. As he was the Secretary Finance his standpoint was always accepted. Once there was a radical decision taken by the Board which conflicted with the policy of the previous government. Additional Secretary who represented the Ministry of Industries who was the Director National Planning of the previous government dissented with the rest of the Board. We never had stenographers taking notes at board meetings. I used to make a few notes on the Board Paper itself and dictated the minutes immediately after the meeting when everything was fresh in my mind. While I was dictating the minutes, I received an angry call from the dissenting member saying that he was not given the time to defend his stand. Victor was good at managing meetings, and he had politely changed the subject. He wanted what he said, and what he wanted to say which he imagined he had said, be fully recorded. This member Sarath was a good friend of mine, and I explained that I record only the reasons for a decision and the decision only. He then sent a two page note to be included in the minutes. As it was a written request from a Board member, I included it in the minutes and warned Sarath to expect serious objections from some members. Tikka came late for the next meeting but still a few minutes before others. He spoke to me and said that he was going to blast me at the meeting. I guessed what it was about. As the meeting started, he looked at me and said that the Board meeting is not there to read reams of history and the policies of previous regimes and pointed out to the bulky set of papers and addressed Sarath and said ‘Sarath we are here not to read your thesis on your political policies. We want only the reasons for a decision and the decision and no more.

After a few months of operation, a practical division of work developed between the Chairman and the Director General. Victor was not comfortable spending time at meetings at the Ministry and the Minister. The prevalent practice at the time was that all recruitments must have the approval of the minister. In anticipation of the problem of undue interference by the Minister I mentioned to him that the EDB should be a center of excellence and we should try to build a team of competent professionals. He agreed with my proposition but said that he wishes to meet the candidates before appointment. He suggested that at the staff levels I should make my own selection and send before him at least twice the number of candidates selected where he would give his own opinion of the best. This was not a problem at all and on a few occasions his choice was better than ours. One example was in the selection of a director finance. I insisted on a candidate who was a graduate with professional qualifications in accountancy. He yielded but told me that the candidate will not last too long as he was unstable. After a couple of months this person left, and we had to advertise again and after our selection presented two candidates to the minister. One candidate was a young man with both cost and chartered accountancy qualifications. The other was a middle-aged spinster with government accountancy qualifications and experience. Minister took some time chatting with them. After sending them away he said that he knew that I would press for the young man. He then asked me to take the lady and said, ‘she will be a battle axe and stay with you”. He was good at judging people. The lady was a real strength to the EDB. Unfortunately, she died from cancer and worked until a couple of days before her death. I asked her to go on leave but she told me that she can bear the pain when she is at her job.

For non-staff posts we had examinations conducted by the examinations department. For labor grades I had no objection to recommendations from the minister. There was one case the minister wanted me to accommodate his neighbor who was a retired scientist with experience as head of CSIR and RRI. This person was interested in the post of Director Projects Division for which we had already appointed a dynamic former IDP official. I explained to the minister that it would be very unfortunate if that appointment is changed. Then the minister suggested that the scientist Doctor be assigned the services division. When I gave the name of the then holder and explained that the job entails working very closely with other government agencies and the then holder from the SLAS was eminently suitable for that. Before the minister suggested other posts, I offered to take the Doctor as a consultant on which the Minister agreed. Later I found that this man was dishonest and had to insist that he be sacked. I had to take a strong stand that if he was not sacked, I would resign from the EDB. He was discontinued. I do not wish to repeat the sordid details of his sacking as I may have written about that earlier. The two officials I had protected were assets to the EDB and one even held the post of Director General in later years.

We lost the invaluable patronage of the Minister Athulathmudali when he was assigned the Ministry of National Security. I offered my services to him as the Secretary of that Ministry. He wanted me to join the Ministry of Trade and hold the post of DG EDB concurrently. All the senior heads of agencies advised the Minister not to accept the new ministry.  I believe as he was very competitive and wanted to deliver and demonstrate his superiority over his fellow ministers in the Prime Minister stake, he did not want to reject the opportunity. But once when I saw a grave danger to the EDB in losing the cess funds where our people had been persuaded by the Finance ministry to annul it with the glib promise of liberal Treasury grants whenever required. This was tried many times before when I had challenged them to change the law. This time they had made the move in my absence on a consultancy abroad. On my return the moment I heard about this betrayal I met Lalith and told him that is the death of the EDB. He was furious and protested to the President and requested the Chairman EDB to rescind the agreement to drop the CESS fund. Thanks to Lalith the Cess is still there but no Chairman of the EDB has had the guts to ensure that the cess funds are is directed to the EDB without sending it to the Treasury which is taking the Lion’s share of the Cess collections. EDB is starved of funds for export development. There is no wonder that the trade gap has expanded, and we are faced with a foreign exchange crisis.