Nobel Peace Prize winner Muhammad Yunus from Bangladesh earlier this week made a valiant call for a bailout package for the world’s poor.
At a recent meeting in Tokyo, the microfinance guru warned that the global economic crisis will hit the world’s poorest people the hardest and that “there is no bailout package for them.”
In Sri Lanka the small and medium sector is slowly dying primarily due to the fallout from the global crisis with some experts saying the situation will worsen by mid-year if the government doesn’t provide an impetus just like what many countries are doing elsewhere.
SME industry experts note that many small businesses are in deep trouble with cash-flow problems, retention of workers being an issue and mounting bills to pay. This affects the poor and the poorest of the poor with workers losing their jobs in a sector that the authorities are yet to pay any attention.
Chamber leaders say this sector needs some ‘oxygen’ similar to that given to finance companies which come under the Central Bank’s Rs 4.2 billion bailout package.
Particularly worrying is the loss of business and sales in small companies and entrepreneurs as the global crisis takes root in Sri Lanka. For example, a small-time exporter was forced to close his factory and discontinue the 30–odd employees as his orders dried up and fell to zero. “What can I do … I pay bank interest, borrow and keep it going while losses rise?” he asked. Scaling down operations and reducing business is happening across the board.
Scores of workers are being laid off at small units like this adding to the burden to families, particularly low income groups. Some countries are taking this threat seriously and one in particular has gone to the extent of suspending some labour laws to allow layoffs and prevent it being challenged in court – till the crisis is over.
This may however not be the best option for Sri Lanka where there is constantly a battle between employers and workers over worker rights and sudden closures of companies without proper compensation. The Golden Key crisis is a case in point where the employees are struggling to get their February wage.
The proposal to the Labour Ministry by the Employers Federation of Ceylon (EFC) for a shortened 5-day week has also got stuck somewhere and no immediete solution appears to be in sight. Employers say that business is down and running their offices or factories for an extra half/full day on Saturday adds to the costs and thus have offered this 5-day (same number of hours per week) proposal.
It doesn’t affect the workforce except in the case of overtime for workers, which workers and unions should understand given the crisis facing these companies.
“When the big guys fall, the smaller ones are the worst hit,” said a garments manufacturer, explaining: “when a garment factory for example closes, all the suppliers get affected like packaging, buttons, polythene and even food or the nearby tea shop that relied on the patronage of the workers.”
The chain reaction from companies or small units closing is being felt in many sectors and affected families of employers and workers alike.
In some countries, tax payments and other rates have been put on hold for a year while incentives are provided for companies that maintain the same number of employees over a period of time. SMEs are the most vital cog in a country’s economy and in the Sri Lankan case represents 70-80 percent of the economy. No small deal. But from what we see – and as stated earlier - little attention is being paid by the authorities to their problems.
All we have seen so far is a Central Bank bailout of finance companies who are struggling to survive – an issue that has also raised opposition from some circles as to whether public money should be used on private companies to pay off depositors.
Most of the discussions, seminars and workshops on the crisis deal with finance and banking sector concerns and the plight of bigger companies. It’s the same in the cocktail circuit – focus on the big guys.
We again repeat our call for a broad-based, multi-sector task force to discuss all the issues facing the Sri Lanka industry, business and the financial sector and prepare a plan that would benefit all sectors without discrimination.
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