Hayleys chief says rights issues managed ‘reasonably’ well

Respect for rights good for business

By Natasha Gunaratne

Sri Lanka has managed its human rights issue as well as one would expect from a country going through a prolonged conflict, a top business leader acknowledged but warned that any deterioration in the situation could have serious consequences for business. Hayleys Chairman N.G. Wickremeratne said several democratically elected governments had attempted to manage these issues since the conflict began in the 1980's but noted that any human rights abuses were unacceptable to any country. "The crucial thing is that we (our people) must come from countries which uphold human rights because this issue is likely to colour everything Sri Lanka does. It can affect our GSP + scheme with the European Union and have serious outcomes of a different order all together," he said in an interview with The Sunday Times FT.

On its own, Hayleys tells its consumer that it upholders the rights of workers. Its new range of 'ethical tea' from Kelani Valley Plantations, part of the Hayleys Group, gives consumers confidence that the products they consume are created by upholding human rights and ethical treatment of the workers.

On economic issues, Wickremeratne said the way Sri Lanka is managing its economy is not helping the production of ‘really anything,’ "The economy is skewed towards more imports and a service-based economy." He explained that it would be good to have a service based economy for countries which are developed but in terms of Sri Lanka, 50% of the population is in agriculture and industry. An economy like this results in the printing of money or the borrowing of money and counting on the private sector.
"The problem is the prudent management of your national budget. Now, whatever they are doing is highly inflationary. The war is adding to the national accounts. War is an expenditure and shows up in your national accounts as value addition, strangely enough," he said.

Another result of the way the economy is being run is high inflation and an appreciating exchange rate from 2004 onwards. "If you factor in the inflation, the difference between our trading partners and us has appreciated nearly 20%. There is a fairly basic index that you use to measure your export competitiveness. If the effective exchange rate is flat, that is okay. From 1999, it drifted downwards. That makes you more export friendly but from 2004 and it's now at around 110. It's a really adverse outcome for exports by about 20% and it's a huge problem to deal with." An appreciating exchange rate makes the price of imports relatively more attractive than exports. "You tend to depress exports. Even in our construction, we have used a lot of imported items because they are relatively cheap and affordable."

Wickremeratne said what is happening in Sri Lanka is leading to a huge and unsustainable expansion of its trade deficit. "Normally, if a country has this problem, its exchange rate will automatically adjust because it can't sustain itself. But we are sustaining it by sending our migrant labourers overseas and getting their remittances. That's what is funding our trade deficit."

When asked how export oriented companies such as those in the garment industry have been performing well, Wickremeratne said the garment industry has shown resilience and continues to perform despite a low intensity war. "Whether it can survive a high intensity war where there is large scale displacement of people is the problem. They might find it difficult. Sri Lanka business has continued despite the war and largely, the country has managed well."