Could you give our readers some background information as to what are the Ministry' main responsibilities and activities and what has been the development in the sector in the past years?
It is a rather extensive mandate because the Board Of Investments is also the responsibility of the Ministry of Industrial Development. Basically the Ministry has responsibility for the entire industrial sector in particular - textiles which is one of the more significant areas of responsibility. If you look at the Sri Lanka economy as a whole, 52% of our foreign earnings come from the export of garments. A large proportion of these garments finds its way into the markets of the Unites States, and we export about 61% into the United States. Recently we concluded an agreement with the European Union in terms of which some of the competitive restrictions which applied to the Sri Lankan goods were removed so there is a very considerable potential for development of the apparel industry with the view to exporting garments into the EU. That I would say is one of the vibrant fields of activities right now and we have the industrial estates spread all over the country. The Sri Lankan economy about 30 years ago was very much dependant on the export of agricultural products, mainly tea. Tea was very much the main stay of the Sri Lankan economy but there was an element of vulnerability appended upon that, as we were dependent on the vagaries of the World Market. In the early 50's Sri Lanka was doing extremely well because of what was called the "rubber boom". During the Korean war there was a great enhanced demand for natural rubber and Sri Lanka as a producer of natural rubber was very prosperous. Indeed the Prime Minister of Singapore, Lee Kuan Yu, frequently used to hold up "Ceylon" as the country was then called, as a Model for economic development throughout the Common Wealth. However, we realized over time that exclusive dependence on agricultural exports is not healthy and today that is one of the reasons why Sri Lanka has been able to withstand some of the shocks, both internal and external. Internal in terms of military expenditure and external in the sense of some of the problems that arose in the financial markets a couple of years ago in more development economics like Malaysia, Thailand. One of the reasons is the remarkable diversification of Sri Lanka's economy. Last year the manufacturing sector grew by about 9%. The Service's sector by which I mean in particular the Banks and Insurance Companies grew by about 8%. Industry is very much the way forward, it is the source of strength in the Sri Lankan economy. My Ministry is putting a particular emphasis on small and medium industries because we want the benefits to percolate down, to be enjoyed all over the country and not to be restricted to Colombo and the principle cities. As far as large Industries are concerned the Board of Investments is a very powerful mechanism. The Board Of Investments has a fairly long history in this country. Its predecessor, the Greater Colombo Economic Commission, the G.C.E.C, as it was called, was established in 1977 soon after the liberalization of the Sri Lankan economy, after which we accepted policies based upon the Market Economy. The G.C.E.C. was succeeded by the Board Of Investments. The central concept being that of a "One stop Shop" in order that investors would not be driven from pillar to post and would not have to go to several ministries to obtain the facilities that they need. Now it can all be done under one roof. Land, electricity, telecommunications, information about labour costs, values etc., are available in a very convenient form because of the facilities that are at the disposal at the Board Of Investments. The Board of Investments has also statutory power to exempt investors from three major legislative regimes. One is Inland Revenue, the second is Exchange Control and the third is Customs. All these three are very important to investors and the normal procedures do not apply to projects which have been endorsed and approved by the Board of Investments. This gives you a birds eye view of the main areas of responsibility of the Ministry of Industrial Development. I need to add that Constitutional Affairs is also a part of the Ministry. This may seem some what strange as it is a combination of Industrial Development with Constitutional Affairs but that is because of my own background and the role that I played in the last Government being President Kumarantunge's first government from 1994 to 2000. I was also Minister of Justice and Ethnic Affairs and National Integration in addition to Ministry of Constitutional Affairs. The Constitutional Affairs aspect is important in terms of a resolution of the ethnic conflict. The President has repeatedly said that she does not believe in the war as a final solution to the problem and our solution is extensive devolution of power within the framework of one country. We want to empower the minorities to enable them to make their own decisions. For that reasons the constitutional affairs segment of the Ministry is also very important at present.
What have been the recent changes in the constitution of the government that gives more power and rights to minorities?
This is the most far reaching set of proposals ever to be formulated in Sri Lanka as a solution to the ethnic problem and as a way of improving the relationships among the ethnic communities in the country. We have done away with what is called the concurrent list. That is all subjects are allocated either to the Central Government or to the Regional Councils. We have done away with "no -mans -land". The concept of shared competencies is a feature of the constitutions of India and Pakistan and we have done away with it. Subjects are allocated without controversy either to the Central Government or to the Regions. The Central Government retains responsibility for Defense, Foreign Affairs, the National Budget and matters of that kind. In all other aspects the regional bodies are entitled to make decisions governing the lives of people who live in those parts of the country. We have strengthened the Chapter of Fundamental Rights for the first time and introduced the Right to Life, strangely that is not recognized today, it is not a substantive right. Of course it is recognized by the Law but it is not specifically enshrined in the constitution. We have put in the Right to Information which is very important in today's world without which you cannot really have a vibrant democracy. We have another very interesting concept of a Constitutional Council which will enable the holder's of certain officer's in the country, the Auditor General, members of the Permanent Commission on Bribery and Corruption, people like that would not be the nominees of one party of the government in power but all the political parties with representation in parliament will have a role to play in identifying the people who are chosen to fill those positions. These are some of the features of the New Constitution. The Draft was presented to parliament on the 3rd of October last year and the President, - Her Excellency Chandrika Bandaranaike Kumarantunge took the unusual step of attending parliament and speaking in the Chamber, setting out the reasons why these changes are necessary. Unfortunately we were not able to get the draft enacted because there are two requirements we need to fulfill. One is a two-thirds majority in parliament and the other is the support of the people at a referendum. The Government did not have at that time and does not have now a two thirds majority in parliament, therefore we were not able to get it passed with the requisite majority but it was presented as a complete draft last year before the last parliament was dissolved.
With regards to means used for industrial development, Sri Lanka has already established free economic zones. To what extend this has brought a change to the industrial sector and can you elaborate on the newly established plans for free economic zones?
The Free Zones have enabled entrepreneurs to come in with their investments and to operate in an atmosphere of complete freedom. Sri Lanka has probably the most open economy in the whole of South Asia. We were certainly the first country in South Asia to open up our economy. We were the first country to comply with Article 8 of the International Monetary Fund which requires current account transactions to be free of exchange control, to be fully liberalized, and we have accomplished it. The sanctity and the viability of all investments in the country is guaranteed by the constitution. There are no restrictions what so ever on the repatriation of profits, royalties and dividends. There is also no restriction on the ability of foreign companies and individuals to own immovable property in our country. It is not necessary to operate through agents, the foreign countries can come in directly and engage in business activity. The export promotion zones, the free trade zones, is the principal mechanism, the instrument through which what is being achieved. We have several large zones at the moment, the first was Katunayake which is in the vicinity of the International Airport. We have another one in the deep South which is called Koggalla. We have one in Biyagama in the Gampaha area which is most populated and best educated regions. As and when circumstances require we will be expanding the trade zones in the country.
To what extent is the Ministry of Industrial Development and Constitutional Affairs actively promoting foreign investments abroad?
We have embarked on a vigorous promotion campaign because we believe that a promotion campaign is necessary when there are problems and not when things are going extremely well. The Board Of Investments has adopted the policy of sending out promotional missions to different countries where there is a need for active work to be done. In addition to that, in most of our larger missions abroad we have an Officer who is appointed by the Minister of Trade and Commerce. The Officer has diplomatic status and is part of the Sri Lanka Mission in a foreign capital but there is a specific focus, orientation with regard to his duties, which are specifically concerned with trade, commerce, investment and entrepreneurship. This is an on going procedure and from time to time this work is supplemented by high profile delegations going from Sri Lanka. I returned yesterday after undertaking such a mission in Sweden, Denmark, United Kingdom, and Washington. If we make information fully available to the people of the countries where we are seeking for investments and if we follow up in the way described, good results could be achieved.
| What specifically has been the outcome of this trip which aimed to promote the country abroad?
The most encouraging part of the project's outcome was that the private sector representatives who accompanied us as part of the delegation were able to conclude a series of very useful agreements with their counterparts in the countries that we visited. For example in Gothenburgh, Sweden and Copenhagan, many of the companies in the Information Technology field were able to enter into firm partnership agreements and other arrangements of that nature with the companies situated in those countries. I consider this one of the most important benefits that accrue to this country from the visit because it must not be seen as a "one off" effort but must have continuity and we were able to achieve that continuity on this occasion.
Talking about foreign investment policies, approximately what is the power of investment that you are expecting this year?
I do not like to put a definite figure on that but we are thinking of investments of different kinds, foreign direct investments, portfolio investment, trade, and tourism which are our main areas. If you look at trade, last year, the total value of our exports into the United States was 2 Billion USD, of which 1.4 Billion came to us from the export of garments - clothes. Tourism at the moment is doing extremely well. Our Resort Hotels are at full capacity. The non-traditional exports, and in particular e.g. leather goods, sports goods, are doing extremely well. In addition to the traditional commodities and traditional markets we are spreading ourselves out and searching for new markets. For example in New Zealand many of the sails in Auckland Harbour have been manufactured in Sri Lanka. Most of the shirts that are bought at Marks and Spencer Stores in England are made in Sri Lanka. We have a highly disciplined and motivated labour force. We have a particular advantage in regards to our financial, banking, legal and administrative systems, which have been westernized. Sri Lanka has a very high rate of literacy - 91% which is very rare in South Asia and something we are very proud of. In what Human Resources Development is concerned, Sri Lanka has a Life Expectancy of about 73 which is comparable with most countries in Europe. We have a very mature political system since people have been changing governments peacefully at Elections. Our people have been voting since 1931. We have Trade Unions, Social Security Systems, Poverty Alleviation programs. This stability is helpful and should appeal to foreign investors and firms.
As far as the Free Trade Agreement with India is concerned, a lot of people are looking at Sri Lanka as a gateway to a huge market. Now, regarding your industry, and more specifically the apparel industry, how do you see the future, with its threats as well as opportunities?
The future of the Free Trade Agreement is very bright because I would describe it as a landmark development and we use this argument whenever we travel abroad. I used it on this current visit. We are in a position to say with justification that Sri Lanka should no longer be seen just as a market of 18 million people. On the contrary, it is a gateway, a point of entry into the entire sub-continent. That is how we see the Free Trade Agreement with India. We don't regard the relationship as in any way antagonistic. We don't regard India as a rival or competitor but Sri Lanka and India are working together to achieve a great deal. India has the advantage of size, of scale obviously in relation to Sri Lanka but size can be a double edged weapon and Sri Lanka has the advantage of a much higher per capita income, it is roughly twice that of India. Our per capita income today is in the region of US$ 880. That is about double the per capita income of India. This is particularly significant because Sri Lanka has a relatively affluent middle class with very considerable purchasing power. After the Free Trade Agreement which was signed by India, we have found a huge up surge of activity between the two countries. The number of Indian companies doing business in this country has risen by about 7%. There are a large number of venture capital projects and also multilateral initiatives coupled with bilateral agreements. We have SAARC as the major forum for multilateral initiatives but that has not precluded us from negotiating with countries of the region directly and concluding agreements. The Free Trade Agreement with India is a good example. ANCL - the famous Australian Company, purchases Sri Lankan Latex, the natural rubber which is of very high quality and then export the Sri Lankan rubber to India and make use of Indian technology to manufacture surgical gloves for surgical operations. So there you have an Australian Company buying the rubber in Sri Lanka, sending it to India for processing and using Indian technology to ensure a quality product that is enhanced by the quality of the raw material that is purchased from Sri Lanka. Those surgical gloves are good enough in quality to be exported to Europe. This is an example of the kinds of arrangements which are possible as a result of the Free Trade Agreement which has been entered.
You mentioned SAARC, the major forum for multilateral initiatives which has not taken off as it was supposed to. Some argue that Sri Lanka should focus more on bilateral agreements like the FTA with India rather than multilateral units. Do you share that opinion as well?
I don't think we need to choose in that way. You don't have to choose one instead of the other. I think we can do both because they are not mutually exclusive or incompatible. On the contrary I think they are complementary. While we do very useful things within SAARC and I don't mean just political things because that is where some of the problems have arisen. SAARC has been very successful in promoting economic contacts, contacts amongst professionals, among academics, institutes of management, chartered accounts, lawyers, doctors, engineers. It has stimulated a great deal of cultural activities and civil society. Each of these countries have benefited from the activities within SAARC which is very useful. In addition, we believe that bilateral agreements with countries of the region can be of lasting value.
What would be your final message to our readers who are potential investors into Sri Lanka?
The final message is that our country has very considerable inherent strength. The principle advantages are; one with the geographical location. Throughout our history that has been a tremendous advantage. We were occupied by three Western Powers, the Portugese, Dutch and the British between the periods 1505 to 1948. In each case it was the geographical location of the country in the Indian Ocean that attracted these Western Powers. Today in an entrepreneurial sense, in a business sense, that location continues to be a very significant advantage. The Free Trade Agreement with India is a means of maximizing that advantage of deriving the greatest possible benefit from it. That I would say is our first advantage. The second is a high caliber of our human resources, no other country in the region has human resources of this high quality. Thirdly, the complete open nature of our economy. Those are the three principle advantages. Of course all countries have problems from time to time and Sri Lanka's fundamental problem is the ethnic conflict and we have no desire to sweep that under the carpet. We have on the contrary always been willing to discuss that problem in a spirit of candour, frankness. President Kumarantunge has made it explicit that she does not believe that the war is the final solution to the problem. On the contrary problems in the hearts and minds of people have to be resolved at the political level. That is why we are deeply committed to a negotiated political settlement. What is more, President Kumarantunge and her government have the courage of their convictions. We have put down on paper after extensive discussions, a set of coherent and self contained proposals which are designed to put to rest the possible fears in the minds of the minorities and to ensure absolute equality and treatment. Sri Lanka has always been an egalitarian society. The solution that we have put forward is very much in keeping with the cultural traditions of the country. We believe that today the vast mass of opinion in the country is strongly supportive of a negotiated political settlement. Of course there will be opinions but the fringes, extreme opinion, which you will naturally encounter in a situation of this kind. So long as it is not identified with the opinion of the majority, it is seen as something of the fringes, extreme opinion, then it is rather significant. Today the war has had an impact on every family in the country. Everyone knows someone who has been killed or maimed as a result of the war. People ask how much more anguish and suffering need there to be before a pragmatic, sensible settlement. It is that current of opinion that we need to take advantage of to take the country forward to an era of peace and prosperity. There are other very refreshing indications, one of which is the Norwegian facilitation, a new phenomenon. We did not have the advantage of third party facilitation earlier. Because of the erosion of the confidence between the two parties, the involvement of a third party facilitator is exceedingly useful. The Norwegians have brought to bare on their work a remarkable degree of expertise, tact and understanding. They have done a remarkable job. We have the advantage of that, we have competence, expertise, skill and a very supportive and amenable climate of public opinion. If you put all these factors together, we think that forward movement is possible. There is today a window of opportunity which had not presented itself for a long time. It is for all sections for the people of our country to seize that opportunity with both hands and not allow it to slip through our fingers. These opportunities present themselves very seldom in history and if you let slip that opportunity it may not present itself again for a very long time. That opportunity has now come and we are today at a very critical junction in the contemporary history of our country. We are at that threshold today. That is the final message that I would like to project, that there is optimism in our hearts and minds and there is hope and expectation, the country has enormous potential, it has a great deal to offer. Even today despite of the war, the economy is growing by almost 5%. That demonstrates the resilience of our economy. We are proud of that achievement and I think an objective appraisal of the country and its strengths will leave no room for doubt in the minds of investors and that the country is worth looking at seriously. As you said earlier, we have attracted a great deal of negative publicity because of the war but that is inherent in the nature of things. A war of bloodshed is dramatic but it would be a mistake to concentrate on that to the exclusion of other things which do not hit the headlines but which are equally significant. It is that balance message that we would like to project through this. |
