Economic hara-kiri

It is hard to imagine industries and agriculture built up over long years through hard work, toil and great risk being wrecked by government policy. But this is happening right now in Sri Lanka.

Last week we commented on the country’s potato farmers facing economic ruination following the government’s policy of importing potatoes at the time the Sri Lankan crop is being harvested. An estimated 32,000 potato farmers are said to be adversely affected by this move. Undouhtedly, the government’s intention is to peg down prices particularly during the Christmas season. But this, in the long run, is economic hara-kiri. Chillie growers and even the traditional paddy cultivators are now threatened with imports of their crops, all under the name of liberalisation of trade.

Last week, The Island also reported The Chairman of the Ceylon Textile Manufac-turers’ Association, Mr. A. Y. S. Gnanam, announcing that the closure of the textile industry is imminent because of government polices. Mr. Gnanam is one of Sri Lanka’s pioneer industrialists whose thriving companies were given loans by the World Bank some decades ago.

Mr. Gnanam has lamented that the textile industry which pioneer industrialists had nurtured over 40 years was now breathing its last and that workforce of around 30,000 workers will be thrown out of their jobs.

‘What saddens and threatens us is that inspite of our hard work and toil, apart from the capital invested, this sector is on the verge of closure’, he has lamented.

The main reason he has cited for this state of affairs is the removal of the duty of 35 per cent on textile imports. Local importers who have to keep an industry going, paying workers their salaries and other emoluments such as EPF, ETF, bonuses to produce textiles for the nation, now have to compete with textiles which come in duty free.And this is not all. the latest of monsters, the GST, (12.5 per cent) is imposed on manufactured textiles. This is clearly summary execution of the local textile industry because textile importers can now buy their imports from South East Asian countries that have devalued by much as 50 to 55 per cent.

Mr. K. M. H. Akbar, Managing Director of Asian Cotton Mills has pointed out that this industry which has been promoted by successive governments by the year 1993/94 had produced 90 per cent of the domestic demand and employed over 50,000 employees.

The amount that has to be invested to create a single job in industry in this country is tremendous. Thus can the country afford the closure of this vital industry?

Chairman of the Veyangoda Textile Mills, Mr. Dan Muktha has said that this situation has resulted in the government being misled by the garment lobby. While the garment industry is undoubtedly one of the mainstays of our economy today, it is apparent that racketeering of a high order has how gripped the industry. Garments which are said to be exported have found their way into shops and pavements and garment manufacturers are accusing each other of abusing the quota system.

It is imperative that the government has to give a long hard look at the textile manufacturing industry. If it is economically viable – there is very little reason to doubt it – then steps must be taken to save this industry from folding up.

The open economy introduced in 1977 resulted in many nascent local industries folding up. There were indeed some local industries that produced shoddy products such as safety matches and razor blades that had to be improved or closed down. But there were local products made through import substitution that competed well with imported products such as refrigerators. But even these industries had to fold up when duty free concessions given to middle east returnees resulted in a flood from our duty free shops. The intention of cancelling the duty free allowance in this year’s budget proposals was to protect such industries but it has been done the wrong way according to insiders. Instead of cancelling the duty free allowance, certain consumer articles manufactured here could be protected by imposing higher duty rates on imported varieties, it is claimed.

While the trend is for free trade and globalisation there are certain industries and agricultural commodities that have to be protected as is being done by all nations. Experience has shown that Sri Lanka cannot right along depend on exports of tea, rubber and coconut. Nor can the new exports – garments and housemaids – be permanent pillars propping up our economy because these are subject to vagaries of western markets and Arabian sheiks.

A nation of 20 million people should have industries producing their basic industrial requirements and agricultural commodities.