Sugath Kulatunga

A few days back Derana TV in their Rebuild Lanka program had a very interesting episode on investment promotion. It was very positive. The contrast presented between the Singapore procedure and that of Sri Lanka was revealing. That discussion made me give some thought to the subject.

In the beginning, the GCEC made good progress under the leadership of Upali Wijewardhana who himself was an astute investor. The fact that the GCEC was under the President made all the ministers and state officials extend their unstinted cooperation to investment promotion. But there was a drawback the political director in the GCEC was keen to fill the zone and did not bother about the quality of investment. The result was GCEC became a haven for fly-by-night investors in garments, mainly from Hong Kong who were attracted by the US apparel quotas. We did not make an effort to attract technology. Upali discouraged the worst kind of fleeting investors by insisting that they build their own factories. It was a pleasure to see leading ministers like Ronnie de Mel, Lalith Athulathmudali, and Gamini Dissanayake speaking so convincingly at investment promotion events organized jointly by the GCEC and the EDB. It was the EDB that first promoted the GCEC in a full-page advertisement in the Financial Times. The first overseas promotion investment was also done by the EDB in a joint Trade and Investment event in New York. This was the first time our exporters ventured into the US market. They had to be induced to go there by giving them free Air tickets. Today the USA is the main market for our apparel.

One can learn a valuable lesson of experience from this event which was a remarkable success in export promotion and good initiation to investment promotion. This event led to the attraction of two garment factories to the GCEC and a new product of disposable cotton gloves outside the GCEC. It was a result of a concentrated endeavor over a month by a foreign consultancy firm and our director of marketing where they had one-to-one meetings with potential importers and investors, lifted product samples from the market to produce counter samples, and provided all the relevant country information to interested parties. The Sri Lanka community was actively involved in the effort.

This was a time when we had to do country promotion too. Our brochures highlighted the socio-political stability of the country, the high literacy and trainable labor, and the conducive living conditions. Today we have to go beyond that. We have to market potential projects. We should focus our efforts on a few flagship projects in high technology to act as magnets. One can imagine the outcome and the spread effect if we had held on to the Samsung proposal. Only the EDB realized the value of Samsung. The GCEC did not show much interest and not a minister was excited about it. When the Prima project had to be surrendered to SL according to the BOT agreement the Prime Minister of Singapore came here to prevent it. If I remember PM Thatcher visited Saudi to canvass a helicopter sale. The minister from Andhra Pradesh visited SL to lure Brandix Garments to Andhra. Now Government of Andhra Pradesh has recognized Brandix India with a Champion Award 2020 – 2021′. Our ministers show an interest only if there is a personal gain.

Now

A few major areas where we must have at least pre-feasibility studies presented are in graphene, urea, superphosphate, sulphuric acid, silica, ceramics, greenhouses, marine aquaculture, initial refining of silica for solar panels, and assembly of panels. This is only an off-the-cuff selection. A proper selection of projects should be done by a competent team of professionals. Along with this, it is imperative that a National Technology policy be defined which should identify the sectors where SL should focus and action that has to be taken to foster technology development. In this field technology, education is fundamental. Taiwan which is a leader in high-tech, which is an island smaller than Sri Lanka, had 77 Universities and colleges of science & technology by 2010. We must at least have one University on technology and many junior colleges.

On trade and investment promotion, our diplomatic representatives have not made any significant contribution. They consider that it is infra digging to deal with the business community. They can make better use of the Trade Commissioners under them whose major task is alleged to be to provide escort to visiting politicians. When the EDB protested the lack of cooperation in this field from our representatives they explained that they do not have the funds even to contribute to business publications. When EDB offered funds based on a well-defined program there was hardly any response. One response was to fund traveling from Beijing to Shanghai, but no program of action was given. Probably there was a belief that EDB was liberal in disbursing funds. A case in point was the insistence for funds to buy an expensive Nikon Camera by a professional of the CISIR to take photographs of the state of the first containerized shipment of pineapples when it reached Dubai. EDB refused and advised the party to borrow one.

It is necessary that our embassies/high commissions are given performance targets for attracting investments in target markets. To begin with, we could give them a target of one investment in each year. It is good to see our High Commissioner in Singapore playing an active role in investment promotion. Other than such rare cases and our representatives in China and India they have miserably failed in political representation which they claim as their exclusive function. This is amply demonstrated in the unending resolutions against SL at the UNHRC supported by many key members of the agency.

Some of our important embassies also had economic councilors whose job was specifically to support trade and investment in the home country. But they too did not pull their weight and bluffed their way through. The Export Promotion Secretariat used to get copies of their reports on the economy of the host country and the new trends. They impressed us until we discovered that they were accurate copies of reports named the three-bank report which is compiled by the three leading banks of the country.

With the disappointment we had from the officialdom of our foreign representatives the EDB tried out appointing agents to canvass trade. They were handpicked out of Sri Lankans living in the market. We had good results from them until the 1983 black July. One example was the effort of the former General Manager of the Ceramic Corporation then domiciled in Canada who arranged for a leading investor and dealer in ceramic products in Canada to visit Sri Lanka to discuss an investment in Sri Lanka. That too failed due to Black July. BOI should tap the Sri Lankans domiciled in the major markets to act as agents and promote FDI. The Indian diaspora living abroad contributes considerably to the success of trade and investment promotion in India.

A group the BOI should involve for support in FDI is the established multinational firms in the country. Firms like Unilever, Ceylon Tobacco, and Baur’s have developed monopolies and exploited the domestic market for decades. Their contribution to the transfer of technology and export earnings is zero. During the time of NM as Minister of Finance, Tobacco went into tissue culture and Unilever went into Prawn farming to demonstrate their broader interest in the development of the country. It was a sham. These firms should be induced to bring in funds for expansion and for production for export. With their worldwide connections, they should also bring in new FDI. While promoting FDI the BOI should encourage the Ministry of Industries to establish incubators for IT exports in collaboration with e.g. the Moratuwa University.

The importance of a one-stop shop for approval of FDI has been mooted for some time now. Such an arrangement should have political power behind it to overrule noncooperating agencies. In late 1970 the Foreign Investment Approval Committee of the Ministry of Finance played this role effectively. It was chaired by a director of the Ministry of Finance with the Director General of the EDB as a permanent representative. All applications for approval of foreign investments outside the BOI area were first received by the FIAC and were referred to the relevant ministry with an indication of what is expected from the ministry and giving a date when it would be taken up for discussion. There was always cooperation in most cases but when there were delays (never a rejection) the FIAC Chairman would tell the Ministry representative that he would request his Minister to take up with the Cabinet. In projects where substantial export contributions the EDB member would ask whether there is any objection to the item listed for a decision at the next meeting of the Export Development Council of Ministers. This strategy always worked, and approvals were expedited. Of course, the FIAC members were colleagues and acted as a team.  

Hitherto, SL had no policy on FDI and as beggars grabbed at any FDI. Perhaps the leading criteria would have been the size of the unofficial commission. We went on volume rather than the quality of the FDI. The East Asian countries gave priority to technology transfer. South Korea even preferred to buy the technology.   

As far back as 1951, an IBRD report indicated that” Perhaps the most important limiting factor in Ceylon for development at present, both in the formulation of coordinated programs and in its implementation, is the shortage of, trained and qualified personnel at all levels – superintendents, foremen, and skilled workers as well as technical, professional, and higher administrative personnel.” Some of these scarcities have been since addressed. But the shortage of skilled workers, as well as technical personnel, has escalated. High-tech FDI cannot be attracted without skilled labor. For this, the imperative of technology education has to be realized. Sadly, the short-sighted education authorities and the academics have utterly failed in changing the present system of producing educated un-employables who become a burden on society.

Now, these un-employables are employed in assaulting former Vice Chancellors.