In Parliament on Wednesday Budget Debate: Committee State - 5th Day from our Parliamentary correspondents

Votes of the Ministry of Internal and International Commerce and Food
"It is necessary that increases be made in line with the inflation rate"

Parliament met at 9.30 a.m. on Wednesday November 1998 with Speaker K. B. Ratnayake in the chair.

After presentation of petitions and oral questions answered House met in committee to discuss the votes of the Ministry of Internal and International Commerce and Food.

Rohan Abeygunasekera (UNP - Kandy District) moved a cut of Rs. 10 from the votes of the Minister of Internal and International Commerce and Food.

He said: When you compare the estimates for this year with the past years it is evident that the capital allocations for certain sections of the ministry has not been increased this year.

It is necessary that increases should be made in line with the inflation rate. There is no provisions either to meet the obligations of SAPTA which comes into force soon.

The one head of expenditure that is retained is the expenditure head of foreign trips. Though there is no increase either in this head of expenditure, the foreign trips that the leaders of this government had undertaken have not yielded any good results.

Your ministry has neither provided for the implementation of the promised dumping law. With the SAFTA around the corner how are you going to step in to counter dumping if any country that comes under the SAFTA resorted to dumping.

The WTO will at any time demand the privatisation of our state banks and the insurance business. But soon you will be compelled to comply with WTO requirement. Has your ministry taken any steps to meet this situation?

The situation of the export crop sector product has decreased. The only exception is the tea sector.

The turnover of the CWE has fallen drastically between 1992 and 1998. The turnover of 1992 was Rs. 3310 million and the turnover of 1998 was Rs. 910 million.

Your ministry's franchise system too was a failure. It was good enough in 1995 but gradually it has become less profitable.

Kingsley T. Wickremaratne, Minister of Internal and External Commerce and Food said: Consequent to the implementation of the rule-based trading system of WTO (World Trade Organisation), all institutions coming within the purview of my ministry have formulated a new sense of direction to keep pace with the speed of globalised international commerce. It is in this context that our 'Export-import' entrepreneur community is being prepared and equipped to cope with paperless trading that would be the central feature of the emerging e-commerce era.

In anticipation of this the EDB (Export Development Board) has already initiated action to change its TradenetSL into an expanded multimedia facility, Cyber-Trader, providing both trade information and commercial intelligence electronically. Its services now include Internet access, e-mail service, the designing of web pages, production of CD-Roms, teleconferencing facilities etc.

Since the EDB is involved in development and promotion of exports, its essential to analyse the performance of exports before reviewing the performance of the EDB. Sri Lanka's export earnings from 1994 to 1997 grew by 71.85%. Exports increased in terms of value from Rs. 157,789.5 million in 1994 to Rs. 271,155.6 million in 1997.

1. Total exports grew at 13.3% during the year 1997 in dollar terms compared to a growth rate of 7.5% in 1996, from US$ 4000 million in 1996 to US$ 4600 million in 1997.

2. The EDB has contributed to the growth of value-added exports and overall exports. And was responsible in reducing market dependency on North American and European countries by the flow of exports to Asian, CIS, Middle East, East European, African and Latin American countries.

3. Value Added Export Products:

The value added export areas where EDB has contributed are:

Tea in packets and bags, value added coconut products (Desiccated coconut and fibre), fruits and vegetables, spices and essential oils, cashew, prawns and aquarium fish, gems and jewellery, garments, handicrafts, footwear, printing, mineral products, electronic products, value added rubber products, handloom and textiles etc.

SAPTA trade last year had been very much in our favour. Our exports on SAPTA trade 15.8 million US dollars whereas our imports under SAPTA were US$ 12.1 million.

lion is in Sri Lanka's favour. Most of our trade in pepper, cloves, was due to market access to South Asia through SAPTA, and we fetched excellent prices for these products.

It is the duty and responsibility of my Ministry to feed 18 million people 3 times a day. During the last 4 years, our Ministry has been doing this without queues and shortages.

Whatever the criticisms may be, whatever the arguments may be, my Ministry would continue to feed the 18 million people 3 times a day without shortages and queues. This was our biggest election manifesto promise to the people of this country. We have kept our promise and will continue to keep it.

Since, a world shortage of food is predicted due to the El Nino effect, especially in the Asian region. Food security would be of utmost importance. To face this situation my Ministry has activated the Bondsman concept to hold buffer stocks of sugar, dhal, flour, rice etc.

W. J. M. Lokubandara (UNP - Badulla district) said: The Minister's speech is proof that arrogance arises from ignorance.

Will you ever be able to tell the people of this country face to face about what you said about the decline of prices of goods since 1993?

The self-sufficient farmers of Nuwara Eliya and Badulla areas have been destroyed. You did not come to power with the votes of the Indian farmers. You are going against Bandaranaike's policies. You have adopted the policies of the English speaking upper classes. Have you shown any interest in giving jobs to the helpless undergraduates? Instead you remove duty on BMW's.

You import food to feed the people. You say you are not reducing the price of wheat flour to prevent any decline in demand for rice. In that case why don't you reduce the price of petrol?

You say the business culture has arisen from the UNP. Is that why you are ignoring the local businesses. Is that why you have let the timber trade fall to shambles after you came to power.

C. V. Gooneratne, Minister of Industrial Development said: When discussing the Trade Ministry Votes what occupies centre stage is the financial & economic crisis, beginning in East Asia, and South East Asia, and then spreading to Russia, and some Latin American countries, principally Brazil. In the globalized interdependent world in which we now live, 'No country is an island', and the repercussions of the economic and financial crises, has impacted on all countries, some more severely than others. Sri Lanka has also been affected, though much less than most countries. This is due to the prudent fiscal and monetary policies, the present Government has followed due to the mission and vision of President Chandrika Bandaranaike who is also the Finance Minister. In fact we can proudly say that, Sri Lanka would in 1998 have a growth rate which would be exceeded only by a handful of Asian countries, such as China, Taiwan etc.

The financial and economic crisis has had its repercussion on trade flows as well. In fact it is now accepted that the Asian crisis spread to other economies through trade, and loss of investor confidence. There was a loss of demand from countries affected by the crisis - large reductions in imports in one country after another - causing a substantial contraction in the volume of trade. Currency devaluations in East and South East Asian countries also increased the competitiveness of their exports vis a vis exports of other regions, including South Asia.

In this context, the commendable performance of exports in 1998 is indeed noteworthy. In terms of statistics published by the Central Bank, it is clear that in Dollar terms, our exports have held their own. Total exports in the period January - September 1998 have increased by 5.6% when compared to the same period of 1997. Agricultural exports - buoyed by Tea - have done well. Industrial exports were also satisfactory. Industrial exports have grown by 6.3% during the same periods just mentioned. Among industrial export, Food, Beverages and Tobacco have grown by a spectacular 59% and Textiles and Apparel by 11%. Leather and Rubber products have also increased by 10.7%. These are very commendable when viewed in the light of the substantial devaluations in many competing countries, thereby boosting their competitiveness, and to say nothing of the lower growth in world trade forecast for 1998 by the World Trade Organization. I have no doubt that our enterprising exporters would continue the good work in 1999, as well.

It would be relevant to review the scenario relating to Regional and Multilateral Trade. It is heartening to note the progress made in negotiations on SAPTA. The Third round of negotiations will hopefully be concluded soon. The initiative of the Indian Prime Minister at the SAARC Summit in Colombo, to remove non tariff barriers on 2000 items, a concession only confined to the SAARC countries, would give a phenomenal boost to the SAPTA negotiations and to inter SAARC trade. I am happy to note that the problems relating to Rules of Origin within SAPTA would soon be resolved.

Abdul Qadir (UNP, Kandy district) said: the CWE is unable to provide foodstuffs at lower prices. The franchise shop spread around the country is not providing foodstuff at a fair price. Even the farmers are not benefiting.

While other countries are protecting their economies the PA government is removing every barrier.

The people are suffering as a result of destructive trade policies. Poverty is on the increase. You have failed to develop agriculture. More than 10,000 people are living under the poverty line. The necessary support measures have not been given to them by the government.

What action has the minister taken to provide the consumer items at a fair price?

You have not given incentives to the upcountry people, nrt to the traders. This budget has only helped the rich. The plantation workers live in line-rooms built hundred years ago.

The minister must take action against a certain company that imported substandard variety of dhal. Will you divulge their details to us? I will assure you that when we present the budget next year the price of consumer items will be brought down month after month.

Indika Gunawardane Minister of Urban Development and Housing said: The opposition criticised strongly the policies of the Ministry of Internal and International Commerce and Food. But the ministry's actions are controlled by the present international tendencies such as the globalisation.

Unless we explore the world markets we will not be able to find market for our products.

We need foreign investment to develop the country.

I want to ask opposition whether it was the present government or the past UNP government which devastated the country's economy?

Mahinda Samarasingha (UNP-Kalutara Dist) said: The Trade Ministry epitomises the state of confusion in government ranks. The Ministry of Trade says that imports have to be liberalised. The Agricultural Minister says that imports have to be stopped. The local farmers have difficulty in competing with the high quality agricultural products.

I hope you will consult people like Ronnie de Mel who is one of the successful finance ministers.

Textiles are an area that should benefit from the international agreements.

According to eminent persons SAFTA and SAPTA should be put in place in year 2008 not in 2001. The local industrialist according to them don't have the capacity to compete with countries like India. The minister should not be swayed by the dictates of countries like India that will have a distinct advantage through these agreements.

The general feeling about the Bangkok agreement is negative because it has not taken off.

Let us concentrate on SAPTA and try to gain economic advantage from it. India is a potential market and look into possibilities of a bilateral agreement for our exports.

Don't be so preoccupied with inflation. The export sector is essential for economic growth. Devaluing the currency is a necessary evil. Our exporters are facing a dilemma as they can't compete in the world market as other countries have devalued their currencies.

Our productivity has reduced. Put in place some strategy taking into consideration the long term development plans. The two state banks had an ineffective administration. In my opinion the People's Bank should be closed.

We hope that you succeed in your endeavours and alleviate the state of confusion among the government ranks.

Y. P. de Silva, Deputy Minister of Food said: Diverse views were expressed about our ministry today. The Export Development Board has helped our exporters to export their products to about 146 countries.

Furthermore the minister recently visited Iraq and obtained orders for tea from that country. Our government has obtained clearance from the United Nations to export our teas to Iraq which is under UN sanctions.

We are no longer living in the 1970s. We are living in a world of free market economy and it is useless to wish for the kind of controls known to us in the days gone by.

The CWE is importing only 10 percent of the requirements of the country. The rest is imported by the private trade.

We require 90,000 metric tones of potatoes per year for our consumption. CWE imported only 2100 metric tonnes. Do you say the local potato growers were affected by the import of such a small quantity by the CWE.

On the other hand we need 100,000 tonnes of big onions per year. The CWE imported 3542 tonnes. Can this affect the local big onion growers. No... Local potato growers and big onion growers were unable to produce sufficiently to meet the demand. The reason again is the previous government did not support the local growers of the two commodities to enable them to produce sufficiently to meet the demand.

Amara Bhadra Dissanayake (UNP-National List) said: The forty percent increase, mentioned by the minister, in the profits of the CWE, is due to increased prices rather than increased consumption.

There cannot be an upward movement in the consumption because there had been no increase in the personal incomes of the people.

You are importing local agricultural produce when they are being harvested here. This is why I say that the ministry's policies are hurting our producers.

The Weights and Measures Department, which is under the Commerce Ministry must strengthen its monitoring units to prevent the cheating of consumers by the traders who sell underweight commodities.

The GST is a heavy burden on the consumer though taxes are not your ministry's affair.

You have imposed conditions on liquor importers. The DCSL has been excluded from such conditions.

Felix Perera (PA, Gampaha District) said: Free market economy was introduced in 1977. Liberalisation of important enterprises is part of this new economic philosophy.

The new economic philosophy does not countenance pumping money to keeping loss making enterprises going. Instead the new philosophy requires such failing industries to change their priorities and catering to new markets.

We don't have to worry about SAFTA. It is an arrangement between a grouping of countries. There are safeguards too. Therefore we should not worry about it.

(The member quote 'The Island' to prove his case). We are wasting a sizeable proportion of our agricultural products. The wastage of rice is estimated at six percent, while that of big onions is estimated at 40 percent. We thus waste a considerable portion of our products. If we can stop this we can bring down the cost of living.

The only way to avoid this waste is to put in operation a scheme to preserve perishable produce.

We also waste vegetables in a big way.

'Budget - a tragedy for the country and its people'

Continuing the text of Ronnie de Mel's
Budget speech from yesterday

We carpeted the roads from Colombo to Galle. We left money for the carpeting to be done from Galle to Matara. Even with the money there which we left, for four years you could not carpet the roads from Galle to Matara. For four years, what have you done I ask you. Only half a mile carpeted out of thirty miles with all the money in the kitty for four years and that too on one side of the road carpeted only on one side of the road. The other side is about a foot below that. So on a rainy day it is a veritable death trap. All the vans are going down and the people are dying.

(Mr Anura Bandaranaike

The Deputy Minister's brother-in-law, Dr. Salgado, died on that.

(Mr. R. J. G. de Mel)

Yes, that is true. is a veritable death trap. Only half a mile carpeted on one side of the road for four years with all the money there! Now the contractor has left. The contractor was named Bat. The Minister is a friend of mine I told the Minister. I do not mind whether he is Bat, or rat or cat,

Mr. Anura Bandaranaike)

Or Batty.

(Mr. R J. G. de Mel)

Ñ or Batty, get the work done. I said get the work done, I do not mind. But the work has not been done, as the Deputy Minister (Mrs.) Nirupama Rajapaksa who goes on that road will tell you. Now the contractor has left. Probably you did not pay him. I understood from the ambassador of the country of this contractor that this Government defaulted in its payments to the contractor and the contractor left. That is what I heard. I do not know the truth of it. Probably you did not pay him.

Then the Galle-Matara road. It is no longer a mahamarga as I told you. It has become a warimarga It is the same with the Matara-Akuressa road. The money was left by us for carpeting but only a quarter mile has been done on one side of the road for the last four years. Nothing else done. It is the same with so many other roads where we left the money. You cannot get the work done.

This is the real difference between the UNP and the PA. This is the - so much for all your talk,

Then, let us look at some of the famous promises in this famous Blue Book with this beautiful picture of Her Excellency, the promises and the picture that won you the election. I will tell you one thing. A pretty face, a charismatic personality and a pretty smile will win an election once. It will not win an election twice if the promises given to the people of this country have not been fulfilled. This charm can win an election once. Charm cannot win an election twice. How many of the promises in this book been implemented? Not even ten per cent. Ninety per cent not implemented after four years. After all this, Sir, do you expect us to believe that you will fulfill your promises in this budget, the dying budget of a dying government which reminds the country of the last gasp of a dying man, if you could not do so for the last four years?

Let us look at some of the macro-economic targets of your first four Budgets. I hope the Deputy Minister will also get charts prepared like the ones I have brought with me. We are an efficient Party; we are an efficient Government in waiting. Your entire macro-economic targets of the first four years are shown in charts, graphs and diagrams here. In every sector you have failed to meet your targets. I will deal with them one by one. Let us not look at the promises. Let us look at the macro-economic targets of your first four Budgets. None of these targets have been actually fulfilled.

I will give them one by one. I will give them not in my words, I will first give them in the words not of the UNP, but in the words of your new Friends, the World Bank and the IMF whom you tell us so often even ad nauseam that they are praising you to the hilt heaping encomiums on you; An island of tranquillity in an ocean of turbulence.' My foot! That is the only thing I can say. What an island of tranquillity even Parliamentarians are stopped five times on the road before they can come into this House. I have been stopped five times today before I came to this House from my house. So this is an island of tranquillity. I would say this is an island of insecurity civil war, government incompetence and bureaucratic mis-management in an Indian ocean of peace and calm. Anyway let me tell you what the World Bank has stated. It is very revealing your Friends in the World Bank-you say they are praising you to the hilt. I am quoting from 'Sri Lanka Recent Economic Developments and Prospects' the last World Bank Report on Sri Lanka. Let us first deal with unemployment and the World Bank's comments on this. With 35,000 graduates unemployed and hundreds of thousands of A/Level's and O/Level's despite all your proud boasts educated unemployment is probably one of our most serious problems. This is what the World Bank say not what we in the UNP says. I am quoting from them.

'É much of the decline in unemployment in recent years is due to outward migration.'

That is our maids. He must be thankful to Mr. A. C. S. Hameed for starting the set up for sending them out there when in your time there were only 15,000 out there due to your pernicious Exist Permit System.

'É much of the decline in unemployment in recent years is due to outward migration, military services, and discretionary recruitment in the public sector Ñ 35,000 trainee teachers in 1995, 37,000 Samurdi animators in 1996-97, and a few thousands in the various state enterprises (Port, Petroleum, etc.)'

Not due to any increase in economic development or production, only cannon fodder. That is your employment and maids nothing else.

Then, Sir, the 'Economist' of August 8-14, not far away-just two months ago, confirms what the World Bank says. I am quoting;

'Moreover, most of the expansion of the armed forces (now 12000 strongÉ) has consisted of recruits from the poorer regions of Sri Lanka.'

Quite true, particularly from the South.

'The war has created other new jobs. The security firms that provide round-the-clock guard for every private business of substance in Sri Lanka employ about 150,000 people, mostly from the urban poor. A large number of others are engaged in supplying goods and services to the armed forces. In all the war may be thanked for about 400,00. new jobs...

The 'Economist' says that out of your great employment statistics, 400,000 new jobs the war may be thanked for this. This is what the 'Economist' says. They give a break down in the 'Economist.'

Trainee Teachers 35,000

Samhurdhi animators 37,000

Overseas employment

1994 131,863

1995 170,130

1996 162,511

1997 150,000

War Related and security jobs 400,000

So this is the million jobs you say you have created. Almost half due to the war and security, the other half maids abroad. Only about 70,OOO other jobs have been created in this whole country for 4 years. Only 70,000 jobs. This incompetent and inefficient government can only reduce the unemployment problem if the war goes on. I have to be brutal but I have to be frank.

Then we come to savings. This is what the World Bank says. You talk of saving going up. Savings down. This is what the World Bank says.

'Domestic savings rate increased from 15.3% in 1996 to 17.3% of GDP in 1997. An increase of 2%. While this is commendable, the achievement has been made mainly by a reduction in government dissaving....'

Mark my words. By reduction in government dis saving.,

'.....The dissaving (total revenue less current expenditure) declined from 3.8% of GDP to 2.2% of GDP in 1997.'

Private sector savings increased by only 0.4% in 1997 Wonderful increase! However in 1998, the government has been running a current account deficit and the dis-saving will hurt savings. The current account deficit as at end July (before supplementary estimates in September) was over Rs 10 billion. Together with the slower economic growth, the domestic savings ratio is set to decline in 1998.

You talk so much of your national savings ratio of 21 per cent. Do not forget that even under D. B. Wijetunga the National Savings Rate was nearly 21 per cent. It was 20.3 per cent. So, what are you talking about your great achievements in the last four years? It is slightly less than 1 per cent increase in the last four years.

Then I come to the Ministry of Industrial Development. I am sorry that my good friend, C. V. Gooneratne is not here. The Vote for the Ministry of Industrial Development has been cut down by 51 per cent. The cuts are in the following sectors. Assistance to local textile Industry, Industrial Estates and Contribution to Public Sector Enterprises. Why has this been

done? We would like to know from the Minister. Have you got no faith in my good friend C. V. Gooneratne or in the Ministry of Industrial Development? Or does he have no faith in you? Because I can see that he has no faith in Foreign Direct Investment. He says Foreign Direct Investment is going down everyday; declining every day .

Then, Sir, there appears to be a shift of responsibilities from the Minister of Industries to the Minister of Finance, that is the President, in the Textile Sector. Why has this shift been done? This has happened in the Industrial Estate sector as well. Why has this also been done? It appears that the textile sector will be handled by a new division or department of the Ministry of Finance named Budget Implementation & Policy Coordination Division. The BOI has been allocated a massive Rs 1.5 billion for the development of Industrial Townships, while the Development of Industrial Estates has been cut down from Rs. 1.5 billion to Rs. 660 million. Why has all this happened? We would like to know reasons from the Minister's reply.

Then I refer to privatization targets? How much have you really raised from privatization? Will the Minister give us a factually correct answer?

The Government has consistently mis-calculated the privatization revenues it planned to raise leading to excessive and unplanned levels of borrowing. Privatization targets were set at Rs 8 billion in the budget. However during the course of the year the Director General of PERC publicly stated that they would raise over Rs. 10 billion through privatization. The revised target was heavily dependent on the sale of 10% of Sri Lanka Telecom at around US$ 100m. (Rs 6.5 billion to 6.8 billion) However the sale of Sri Lanka Telecom cannot be completed due to problems with the Wireless Loop Operators (WILLs). Thus the privatisation target has been revised to Rs. 5 billion. This is what will happen to many of the targets that are Set in the Budget.
(Continued tomorow)

We yesterday inadevertently said that
Mr. de Mel's speech had been concluded.
The error is regretted