Does Sri Lanka Celebrate Its Private Sector?

The Sri Lankan authorities, in the last few years, have firmly maintained their stance that they fully support the Sri Lankan private sector and believe it to be the economy’s ‘engine of growth’. The rhetoric hasn’t wavered, in the sense that the government has never shown signs of being systemically anti-capitalist (no, I haven’t forgotten the expropriations bill, though). Yet, my interactions with many public servants have often left me worried on how genuine they are about it, beyond the rhetoric. And sometimes, this seeps in to the general public too. Recall the Rathupaswala incident where residents agitated against the issue of purported water contamination by a rubber gloves factory. As Dr. Rohan Samarajiva rightly points out in this article, no one – neither from the surrounding areas (including families who depend on the factory for employment) nor from the wider private sector – stood up for the enterprise. An enterprise that is leading the way in Sri Lanka’s move up the value chain – instead of exporting raw rubber, exporting higher value rubber gloves and thereby capturing more value within the country’s shores. Yet, the wider feeling was one of suspicion, not celebration. This week the company lashed out at authorities for dithering on resolving the issue and causing a sharp loss of valuable global market share.

 

Korean mindset
Last month I visited the POSCO Steel still plant in Pohang. While driving through the sprawling industrial complex we passed by rows of blast furnaces which melt down iron ore and other raw materials in the first stage of steel-making. When passing one of them, the guide pointed and announced proudly – “That is the number 1 blast furnace – the first one installed in Korea. It is now designated as a ‘National Economic Treasure'”. Wow. A ‘National Economic Treasure’ – what a powerful idea, I thought to myself. A ‘National Economic Treasure’, in recognition of the role that blast furnace played in giving birth to the Korean steel industry – now in the global top 3. A ‘National Economic Treasure’ in remembrance of the difficult and backward economic situation that it helped overcome – Korea’s per capita GDP in the early 1960s was less than US$ 200.  A ‘National Economic Treasure’ in reverence of the role private sector development played in Korea’s post-war resurgence, rapid growth, and progress into developed country status in under 50 years.
A museum replica of the first blast furnace at POSCO in Pohang, North Gyeongsang Province, South Korea. The original is still in operation.

A museum replica of the first blast furnace at POSCO in Pohang, North Gyeongsang Province, South Korea. The original is still in operation.

On this visit to POSCO, I bumped into dozens of young school kids on a class field trip. It had been similar earlier that morning I visited Hyundai Heavy Industries in Ulsan. On their field/class trips Korean school kids are brought to leading private sector industries, to take pride in them and their contribution. Where are most Sri Lankan kids brought to, on a class field trip? Independence square, a relic of a bygone era;  the ill-equipped planetarium nearby; or Galle Face green. (Or more recently, to the Colombo South Port, which frankly is about 1/10th the size of POSCO’s own port as I blogged about earlier).

 

Sri Lanka must too
While we revere the ancient ruins of Polonnaruwa as impressive and valued treasures of our past, we need to embrace our more recent past, our more recent progress, and our foundations of the future. I would suggest that Sri Lanka too declares “National Economic Treasures” – the tea rolling machine or the first colour separator in celebration of a major backbone of our export economy and ingredient of country branding; the Juki sewing machine which mainstreamed the country’s ready-made garments industry and brought a revolution in rural employment; the 2-wheeled hand-held tractor (‘Land Master’) – invented by our very own Ray Wijewardena – that ushered in that initial era of agricultural productivity, are possible candidates. Besides, declaring items like the tea roller, first introduced by the Brit James Taylor, and the Juki machine brought from Japan, as economic treasures could have a spin-off international relations/public diplomacy benefit too.
The Juki industrial sewing machine was at the heart of Sri Lanka's ready-made garments (RMG) take-off

The Juki industrial sewing machine was at the heart of Sri Lanka’s ready-made garments (RMG) take-off

Chambers can take the lead
The country’s Chambers of Commerce will benefit the most from a wider awareness of enterprises’ contribution to the country and help stem “industry-bashing”, and so chambers must take the lead. The Chambers could have a national media campaign celebrating the private sector and its contributions, with TV documentaries that give viewers an insider view of key industries and more school visits to industrial sites. Be it big or small. In an era of overbearing state in economic affairs, we need to remind people that its the private sector that creates growth and this can only be done by the private sector themselves – led by the chambers. The big export factory down the road where your nephew works it is not evil – that’s the private sector and the engine of growth. The small ‘saivar kadey’ at the junction which your uncle runs, that’s the private sector too, and his taxes pay for government services.

 

PSD in the curriculum
Meanwhile, selected universities (for instance, Colombo, Peradeniya, Kelaniya, Moratuwa, and especially the trail-blazing Uva-Wellassa) and colleges (like NIBM and NSBM), can develop modules titled “Industrial Development in Sri Lanka” or “Private Sector Development in Sri Lanka” within their economics and business degree programmes. A course on Private Sector Development in Korea at the KDI School of Public Policy which I am currently auditing traces the path of Korea’s PSD journey and key success factors and plots future strategies against challenges. Students undertake readings and presentations of case studies of leading companies like POSCO, Samsung, LG, Hyundai, etc., and dissect their success and evaluate how government policy played a role in their growth.

 

Shifting the discourse
In Dr. Samarajiva’s article which I cited earlier, he observes that “our popular discourse is fundamentally anti-corporate” and warns of dire consequences. A combination of the activities I mooted here – some immediate, others more medium-term – that address the “suspicion” towards the corporate sector, bridges the lack of understanding of the entirety of the Sri Lankan private sector, and develops a more nuanced appreciation for the role it plays in the economy – can go some way in stemming the anti-private sector mindset. People, and more importantly politicians, need reminding that although the post-war bump was due in large part to public spending on infrastructure, sustained rapid growth relies entirely with a thriving private sector that Sri Lankans embrace and celebrate. 
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2 thoughts on “Does Sri Lanka Celebrate Its Private Sector?

  1. You need to state the problem more clearly.

    This regime, by word and by deed, supports a state-lead, interventionist economy.

    The public at large play little role in the formation of this policy. In my opnion the public is largely indifferent to the private sector or may be mildy hostile. What you have proposed is to try to sell the benefits of private enterprise to the public. This is good, but will not alter policy for the reason stated above.

    If policy is to change, you need to address the policymakers, who take the decisions.

    If I were to elaborate on the policy, apart from expropriation you need to look at
    1. The renationalisation of AirLanka, Sri Lanka Insurance, and several others.
    2. The number of new state ventures launched, including those by state organs such as the military.
    3. Tax regime that favours the state (eg supermarket VAT, not applicable to CWE)
    4. The milk scandal -designed to promote the state player and that of some cronies.

    There are others that you can think of, the above are by way of example only.

    The private sector is allowed to participate through cronies only. Tenders, contracts etc are awarded in a opaque manner to a select set of cronies. Rules and regulations are also drawn up to benefit these cronies. This is classic rent-seeking behaviour.

    The rest of the private sector are seen purely as a means of collecting taxes, nothing else.

  2. You continue to impress me with your style of simplifying complex economic arguments so that they could be understood by the ‘regular’ person. Keep up the good work; you are producing large positive externalities!

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