{"id":105528,"date":"2020-08-15T15:29:46","date_gmt":"2020-08-15T22:29:46","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=105528"},"modified":"2020-08-15T15:29:46","modified_gmt":"2020-08-15T22:29:46","slug":"the-proposal-to-establish-an-industrial-development-bank-part-1","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/08\/15\/the-proposal-to-establish-an-industrial-development-bank-part-1\/","title":{"rendered":"THE PROPOSAL TO ESTABLISH AN INDUSTRIAL DEVELOPMENT BANK (PART 1)"},"content":{"rendered":"

BY EDWARD THEOPHILUS<\/strong><\/em><\/span><\/h2>\n\n\n

Wide\npublicity has given a proposal to establish an industrial development bank in\nSri Lanka by the Minister of Industries, Mr. Wimal Weerawansa, and it is a good\nideological contribution from a politician, and the government must instigate\nthe idea. An industrial development bank needs the country to stimulate\ninvestments in industries that have been neglected areas of the economy as the\ninvestors in the country turned to service industries to make quick profits\nfrom services such as tourism, contracts, sales, and others. When the service\nsector attracted to provide employment and to promote businesses in the country\nafter the Cold War industrial development was given less attention. Many\ndeveloped countries followed the promoting service sector neglecting the\nmanufacturing sector. The best example is Australia. Mr. Weerawansa as the\nminister of industries has proven that he can develop good policies as well as\ncan implement policies that are copious for the economic progress of the\ncountry. <\/p>\n\n\n\n

After\ntaking over the ministry before the election, Mr.Weeravansa has taken keen\nsteps to revive industrial firms that have been abandoned and neglected by the\nprevious government, and these industrial firms need modernizing in a variety\nof ways such as product developments, product quality development, application\nof technology, improvement of the production process, marketing of products,\nsearching for export markets to sell products overseas, Industrial research,\nand many others. To successfully play the new role in government industrial\nfirms demand the injecting funds to industries and the government has limits to\nallocate funds in the current economic environment of the country.  In this background, an Industrial Development\nBank could play an excellent role and promote investments.<\/p>\n\n\n\n

The\nCOVID pandemic has given a signal that Sri Lanka may need to restrict the exporting\nskilled labour and now it might not easy as was in the past. While making an\ninternal market to absorb repatriate labour industrial development effort to\ncontribute 25% of GDP would be an alternative approach to policy development. An\nindustrial development bank could play an effective role to absorb repatriated\nlabour in various sectors of the economy.  The policy-makers in the past considered\nshort-term indulgence exporting domestic labour, and they didn\u2019t consider that\nencouraging a production-based economy would bring more benefits to people\nwhile allowing exporting excess labour. <\/p>\n\n\n\n

When\nlooks at the policy developments of Taiwan and Hong Kong it seems that the UK\nsupported during a long period to come up Hong Kong, and Taiwan gained economic\nstrength in a short period with the supports of direct investments from the USA\nand trade supports from China.  Sri Lanka\nhas a similar land area and population to Taiwan, but it is behind Hong Kong\nand China, talking about the past and to becoming a Singapore, where shows the\nprosperity in statistics based on the lower population.  I don\u2019t abase the achievements of Singapore\nand my argument is attempting to become a Taiwan would be the best choice.  Sri Lanka could come up to the level of\nTaiwan if it can provide intelligent investment services for expanding the\neconomy in the industrial sector. An industrial development bank could give\nleadership not only providing finance supports for industrial development but\nalso to develop policies for the entire industrial sector with great\nsupervision. <\/p>\n\n\n\n

It\nis seen in newspapers reporting industrial base innovation by young people,\nthese products have not been tested considering multiple aspects of the\nproducts such as quality, marketability, cost of production, application of\ntechnology, safety, and many aspects. \nThey report for the publicity and vanish or neglect after new reports.  An industrial development bank can motivate\nsuch innovation and provide financial supports to commercial productions.\nChina, India, Japan, Korea, and other industrial countries have been working\nfor industrialization giving priority for innovation, and an Industrial\ndevelopment bank can play a massive role in this process. Before the\nestablishment of the national development bank, big talks were in the country\npractically administrators have neglected the role, and an executive of the\nnational development bank turned to preach religion and play politics. An\nindustrial development bank should learn lessons from the past and must focus\nto achieve the purposes.  Financial\ninstitutions in Sri Lanka including the Central Bank, trading banks, long term\nfinancial institutions, savings banks have incompetent to achieve purposes\nbecause they were launched misguided policies by stupid executives.       <\/p>\n\n\n\n

The\noperations of trading banks have become a critical issue in the country as the\nmountain of non-performing credits the system is a congruous factor for\ncircumscribing industrial credits, and many related factors have become a dogma\nto the banking market in Sri Lanka. The proposed industrial bank should not\nfollow the steps of the management style of other banks that are like a\ncontrite sinner with a volume of transgressions.  According to the idea of the minister, the\nproposed institution should be a government bank that means the preponderance\nof ownership shall be in the government hands. There is a strong logic in the\nidea of the minister because the capacity of the private sector in Sri Lanka\ndoesn\u2019t appear that it can provide a monumental volume of capital to\nsuccessfully operate a bank that aims at providing financial supports for\nindustrial development. Industrial development should have a massive volume of\ncapital due to two major reasons, inflation and declining the foreign value of\nSri Lanka Rupee. The liquidity and the lending capacity of the bank should be\nbased on the volume of the capital of the bank \n<\/p>\n\n\n\n

If\nSri Lanka\u2019s government has reserved funds from budget surplus and foreign\nexchange reserves to spend for industrial machines, raw materials, and other\ninput the keeping full ownership of the proposed bank in the hand of the\ngovernment would be a good idea, but at this crisis time, could the government\nbudget allocate sufficient funds, to establish an industrial development bank\nis a question. As the government has many commitments with the COVID pandemic\nit is required to consider a different structure for the proposed bank without\nharming the idea of government ownership. <\/p>\n\n\n\n

The\ngovernment policy-makers must agree with the idea to inject a large sum of funds\nto establish a bank if the entire volume of capital is contributed by the\ngovernment. The current economic condition in the country shows that the\ngovernment is not in a position to make a huge contribution and it invites to\nrethink the capital structure. <\/p>\n\n\n\n

The\nproposal to establish an industrial development bank should focus to invest massive\nsum of funds, and strategically, it should work as a measure to control and\nreduce inflation and to attract excess money in the economy for development\npurposes.  Helicopter money created in\nthe COVID 19 pandemic situation has caused increasing prices of consumer goods\nand services, and if the government has strategies to reduce money from the\nmarket it shall support reducing the prices with production incentives,\nespecially in the agricultural sector. \nHow can encourage people in Sri Lanka differing consumption to invest in\nthe industrial development bank might be a problem to the government\npolicymakers. But they must find strategies with an effective marketing\ncampaign.   <\/p>\n\n\n\n

When\nthe government plans to establish a bank, it needs to consider a broader area\nof aims and strategic structure of the bank and the purposes of using funds.\nThe proposed bank must be free from political influences and an institution\nthat operates consistent with its policies. \nAs it is known to people banking market in the country pushed a weak\nenvironment as it had not been operating with a strong policy structure and\npolitical influences and dishonest of the management launched the banking\nmarket to a trap.  The policymakers in\nconnection with an industrial development bank must learn lessons from past\nbanking operations.  The government\npolicy needs focusing to manipulate strategies that would not be a failure and\nwould be successful to achieve objectives. \nThere may be a range of impediments to establishing an industrial\ndevelopment bank.  Government politicians\nmust critically evaluate such views because many people in Sri Lanka tend to\ncriticize this type of proposal without knowing positive impacts on the economy\nand without studying the proposal.<\/p>\n","protected":false},"excerpt":{"rendered":"

BY EDWARD THEOPHILUS Wide publicity has given a proposal to establish an industrial development bank in Sri Lanka by the Minister of Industries, Mr. Wimal Weerawansa, and it is a good ideological contribution from a politician, and the government must instigate the idea. An industrial development bank needs the country to stimulate investments in industries […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[],"class_list":["post-105528","post","type-post","status-publish","format-standard","hentry","category-edward-theophilus"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/105528","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=105528"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/105528\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=105528"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=105528"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=105528"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}