Industry seeks ‘One-Stop Shop’

By Antony Motha

The Industrial Association of Sri Lanka (IASL) and Institute of Policy Studies (IPS) jointly embarked on a process, last year, to cobble together a National Industrial Policy Framework (NIPF). The consultative exercise collated views of key stakeholders in Sri Lanka - including industry, employees and public authorities. The initiative, funded by World Bank, was completed and the report handed over to President Mahinda Rajapaksa, also Chairman of the Economic Council, in March 2007.

Key conclusions of the NIPF:
•Overall economic stability is essential for growth
•Rural development must come from business linkages, not handouts
•Industry requires better access to finance and information
•Trade remedies are essential for protection of domestic industries

Final policy recommendations, based thereon:

•The government must facilitate, by establishing an umbrella organisation/ one-stop shop for industry
•Policy should be a consistent, consultative and transparent
•All constraints must be addressed fast, within this framework

Addressing the AGM of IASL this week, Dr Anura Ekanayake, Chairman, spoke of the consultative process that had been followed. He was pleasantly surprised to note the degree of understanding and goodwill that emanated from the trade unions. “They are aware of productivity issues and competitiveness concerns,” he remarked.

Drawing on Central Bank statistics, Dr Ekanayake expressed concern at the persistent decline in industrial growth, quarter by quarter. After recording 8.3% during 2005, growth had slipped to 7.2% during 2006; Q1 of 2007 has been a matter for real concern, with growth declining further - to 6%.

This trend is particularly worrying because the slowdown is happening “despite the economy benefiting from increasing external and domestic demand for factory products”. Intensified global competition in the apparel industry and deceleration of economic activity in the North & East complete the gloomy picture.

Attempting to examine some of the causes of this trend, Dr Ekanayake spoke of higher and more volatile energy prices. Domestic prices are determined by international markets.

The higher prices have had serious repercussions on manufacturing industries across the board. Predictably, these implications have been harsher on industries that are energy intensive.

The sharp rise in administered interest rates has raised financing costs. Due to the lower operating margins that they typically command, the “small and medium sector has suffered more than others,” Dr Ekanayake clarified. The deterioration in exchange rates has affected the competitiveness of domestic industries by increasing their cost of imported inputs.

Local industry was further impeded by delays in implementing infrastructure projects. By end-Q1 2007, only 8% of funds had been deployed, against the 25% that it should – on a pro rata basis – have been. Dr Ekanayake urged Kumara Welgama, Minister of Industrial Development - and Chief Guest at the AGM, to ensure that “expenditure be invested rather than diverted for other purposes”.

Welgama asked members to focus on the broader picture of balanced regional development. He urged industrialists to avail of the concessions offered by the government to invest in remote areas.