By Garvin Karunaratne

It is a fact that many garment factories are closing today. This is attributed to the denial of the GSP Plus concessions. A number of foreign investors had even taken local bank loans and have bolted taking profits away. – It was a decade ago that Kabool of Pakistan vanished overnight with unpaid bank loans, unpaid EPF contributions and unpaid salaries. It is sad that we do not have the ability to learn from earlier mistakes.

In a case personally known to me an entrepreneur exporting pottery and coir items has gone bust, has had to sell his lorry and cabs and even some land to settle his debts. A few years ago he was a jubilant entrepreneur, who did two trips to Europe in connection with his trade.

In 2009 in one of my Papers I recommended that all garment factories that are on the verge of declaring themselves bankrupt should be taken over. I yet stand by this idea. It should be done in the case of all enterprises: In my eyes, any enterprise in Sri Lanka though it rightly belongs to the owner, the latter is also bound to run the enterprise in the national interest- for the creation of employment to the people and to produce what is required for the nation. In that process the owner makes a profit. Though he may be the owner he is not entitled to close down the factory. If he has a problem the Government should help him.

It is also high time that our Government understands the basic fact that a high interest regime- that gives bank loans at 24% interest though it may be good to curry favour with the IMF, will inevitably see the end of all our existing industries.

In case the enterprise is yet under performing the Government should adequately compensate the owner and take over. Thereafter it is up to the Government to get going with the enterprise, providing employment and also producing what the country needs.

The question that then comes up is: Can the Government handle commercial establishments efficiently?

The answer is that the Public Sector did handle commercial and all types of development work very efficiently from the Fifties onwards.

The chief officers the Assistant Commissioners, the Commissioners, the Directors. the Government Agents and their Assistants all were once adepts in running the commercial and development institutions. I speak through sheer experience as I was one of them.

The Controller of Foreign Exchange at the Central Bank did do a marvelous job of controlling the use of foreign exchange that came into the country. Before Sri Lanka embraced the IMFƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s Open Economy in 1977, every penny that came in was counted and used in the national interest as determined by the Sovereign Government. Since 1977 the Central Bank no longer controls the foreign exchange that comes in. In my thinking since 1977 Sri Lanka was no longer a sovereign country as it ceded total control of its foreign exchange to the Private Sector in keeping with the IMF dictates. That task is left to the Banks to make money- to plunder our hard earned foreign exchange. The Central Bank has again and again stated that it controls only our local currency. (The Island, 17/2/2000: Page 95 in my book: How the IMF Ruined Sri Lanka(Godages)

Since 1977 Sri Lanka gave up national planning, gave up the task of accounting the foreign exchange that comes in and allowed the Private Sector and that includes the foreign banks, multinationals and companies to handle the economy. The Public Sector that ran the task of national planning and administering the country was made non functional all due to following the Structural Adjustment Programme of the IMF.

Out goes the aim of serving the people. Comes in the motto of making profit. Serving the people is of secondary or no concern. Even after three decades of implementing the Structural Adjustment Programme of the IMF our leaders fail to realize the basic fact that all the dictates of the IMF are aimed at crippling our industries and our production base to enable the Developed Countries to export their manufactures to us and make riches in the process.

Since 1977, the Private Sector has had a hey day. The owners and the management have been drawing fantastic salaries and perks. In the Golden Key Company some eight Deputy Chairmen are alleged to have drawn salaries of Rupees three million a month plus perks. The Owners and the higher managers drawing high salaries has been the order of the day y in Sri Lanka and paying perhaps the lowest tax in the World- 24% only, far lower than in the UK and the USA.

Another aspect is that private enterprises expect fantastic profits. They close down enterprises when the profits are low..

Is there a method out of this?

My mind goes back to my work in the Administratiive Service in Sri Lanka and my consultancy in Bangladesh..

The Government Agents handle development work This began in the Fifties with Rural Development and Cottage Industries. Later the Cottage Industries was expanded to Small Industries. At Hakmana, in the Matara District, we had a Powerloom Cooperative, which turned out the best quality textiles- that could easily match the best quality available for sale in the UK. There was a huge demand for Hakmana suiting material and people from Sri Lanka who had migrated to the UK whenever they came on holiday would come in search of Hakmana suiting. I became aware of this when they sometimes approached me to get this suiting. This Power loom was managed by leading members of the community and it was headed for long by the Divisional Revenue Officer at Hakmana, Ranjith Wimalaratna, who did not draw a cent as a salary from the Powerloom. . It was a part of his onerous duties being in charge of the area. He guided the entire powerloom cooperative. As the Government Agent, the officer in charge of the District I became concerned when any of the powerlooms ran into difficulties and then I would spend some time to trouble shoot and sort out the mess. I did not get paid for that task because that fell to me in addition to my duties.

Was this Hakmana Powerloom industry a one and an only factory? No every District had a number of powerloom industries- established in the Sixties with Chinese Aid by the Small Industries Department that had a special Deputy Director in charge of arranging supplies of yarn etc and also attending to the infrastructure that was necessary for powerlooms to function efficiently. The Department had a Special Unit at Velona which would guide the powerlooms on all technical matters. As the Government Agent at Matara we ran at least three powerlooms and Hakmana was one of them.

Earlier at Kegalla I had around four powerlooms and all ran well under the same management pattern.

Cooperative industries, run by the community members, under the guidance of government officers- the Government Agents of the Districts and his Assistant Government Agents in the Divisions did perform a yeoman service in textile manufacture in the pre 1977 period. They also ran the handloom industry where handloomers worked in their homes turning out sarees and handwoven textiles. The Cooperative Union and the Small Industry Department shops- the Lak Sala sold the sarees done by the handloomers. In this manner by the Seventies Sri Lanka was almost self sufficient in all its textile requirements.

The Public service was also entrusted with creating employment when the Divisional Development Councils Programme of 1970-1977was implemented. I was in charge of the Matara District in 1971. Many industries were newly established and ran at a profit for the entrepreneur youth to enjoy. For details: Papers on the Economic Development Development of Sri Lanka(Godages) 2013, which contains a detailed study of the Divisional Development Councils Programme.

I can quote the success of the Coop Crayon Industry at Deniyaya, established under my direction, in 1972, run by the Deniyaya Cooperative Union which was fully commercially viable within six months of its establishment and which turned out a tenth of Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s requirements during the period 1972 to 1977. This was the Flagship Import Substitution Industry of the Divisional Development Councils Programme. This was only one of many industries successfully run under this Programme The Public Service attended to commercial and development work with service as the aim. Profit making was never the criteria. The officers were all paid normal salaries. The President of the Deniyaya Coop Union, the late Sumanapala Dahanayake, the Member of Parliament handled this Coop Crayon, without drawing a cent as a salary. In todayƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s private sector his work would enjoy the salary drawn by the Deputy Chairmen of Golden Key- Rupees three million plus perks a month. They were the cooperative entrepreneurs who contributed their might for the success of enterprises without any payment.

An important premise of this type of industry is that it is a community cooperative a cooperative that is run by the community where the workers are also members of the community. The aim of this community cooperative is to enable production that the people need at a reasonable price, bring about employment to the people. The aim is not profit making, though a small profit is aimed at to ensure that there is no loss to the Government..

Considering this experience it is not a difficult task to attend to garment factories that are closing down. The Government has to take over all closing down garment factories and run them as cooperatives, run by the workers and members of the communities. The Government has to provide the infrastructure that is necessary. The technical aspects have to be done by a Department like the Small industries of the pre 1977 period headed by a Deputy Director with a task force, finding orders and guiding the production. The administrative guidance can come from the Government Agent and the Assistant Government Agents of the Divisions.

It would be interesting for our leaders to realize that since 1977, the Department of Small Industries exists merely in name with officers drawing salaries while they have very little work to attend to. The role of the Deputy Directors of Planning in every District is similar. This is due to no fault of the officers but the fault of the system which does not get them working.

Herein lies the answer to the ailing garment factories and ailing industries in Sri Lanka.The Government need not be frightened to handle this responsibility, because within its own Administrative Service ranks there are able officers who can manage these tasks. They have a history of managing enterprises and they can be entrusted with this task immediately. The Government has to provide the infrastructure, ban the import of garments and all sorts of goods that can be produced locally, from foreign countries. and all items that can be made locally. The Government has also to establish the abolished Marketing Department with canneries in Colombo and many districts. The closed down segments of the Department of Small Industries has to be re established.

There will be senior officers in the Administrative Service that can get the unemployed graduates on national tasks that will end in creating production. All this can get done through the funds being spent for vocational training today.

Self employment has to be added to the curriculum of vocational training. Today we train thousands in vocational training and do not guide them on how to be self employed. In the Youth Self Employment Programme that I established in Bangladesh in1982, which has grown from strength to strength and has guided over two million to be self employed by February 2011, the key strategy was to include self employment guidance to the thousands that are being vocationally trained. Self Employment guidance has to be done alongside vocational training.

All these suggestions do not require a red cent extra to our budgets. Guiding enterprises to success falls to the Government Agents, the Divisional Secretaries and the Small Industries Department. Introducing Self Employment as an area of study and guiding the trained to become commercially viable falls to the staff that deal with vocational training. In fact the Youth Self Employment Programme of Bangladesh established by me did not get any new funds. Funds being used for vocational training was used. What is required is not funds, but a re direction of effort and new curriculum.

The voice that the Public Sector cannot handle commerce is dead. That was the voice of Professor Milton Friedman, amplified by the IMF in its Structural Adjustment Programme which we have to dump if we are to create employment for our people, alleviate poverty and bring about prosperity. Professor FriedmanƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s ideas of free markets-liberalization-deregulation stand totally discredited today.. His economic strategies have caused billions in the Third World to become poor and they suffer in silence. It has also caused endless Third World Countries to become indebted. Though this is a fact the IMF yet follows the Friedman policies embedded in the IMFƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s Structural Adjustment Programme, because it helps the Developed Countries to use the Third World countries to remain as producers of raw materials while manufacturing is to be done by the Developed Countries. If any country criticizes the IMF they will not get approval for loans. Unfortunately Sri Lanka is a country that is caught in this stranglehold.

It is upto our leaders to understand the process of under- development thrust upon our countries by the IMF and to have counter policies in place before Sri Lanka is totally ruined.

Garvin Karunaratne, Ph.D.(Michigan State Un iversity)

former SLAS, Government Agent, Matara District

9/2/2013