COL and providing relief to the masses

By Naomi Gunasekara

Ravi Karunanayake

We emphasised on economic growth for the simple reason that it is the only way to turn the country around. The government is target-oriented and wants to ensure that a minimum of seven to eight percent growth is recorded. Otherwise we would be in deep trouble. Because I feel that when you have six to eight percent growth it is only then that we have the economy turning around. Also, with the rest of the region having ten to twelve percent growth we'll be left behind. 

From our ministry's point of view we are certainly urging the trade and commerce divisions to capture the import and trade market and convert it into a manufacturing and export market. This is not something that can be transformed overnight or automatically. It is a process. That is the line of thinking we are going to instill in the minds of manufacturers.

* What are the main areas that you perceive as needing immediate attention during the coming weeks?

My main area is consumer affairs. I want to ensure that consumers will be able to obtain their requirements at reasonable prices and ensure that the cost of living will be affordable. 

The responsibility is to ensure that we provide enough food and consumer items at the correct price. Secondly, I would like to increase international trade. If we can export earth from this place, it is our job to ensure that it is exported! Thirdly, I would like to ensure that Sri Lanka is interlinked to the global village and to maximise our share of the trade. 

We will try to join the European Union and improve our garment trade, especially duty-free, so we would have a 20 percent advantage in this regard. So our approach is threefold: protecting the consumer, providing the necessary business and investor confidence to the small, medium and big entrepreneurs and then joining the global village where we would have to inter-trade the small Sri Lankan products for big products.

* How do you view your appointment as the commerce and consumer affairs minister?

Well, I suddenly feel that my shoulders are very heavy because it is a ministry where a lot of expectations need to be fulfilled. It has a perception of being a very corrupt ministry and I need to get it cleaned up. I'll ensure that it is done to the best of my ability. 

On the other hand, the consumers are expecting the maximum from almost next to nothing. So I guess we'll have to live up to that expectation. Getting the system functioning within a bureaucracy is going to be the most difficult aspect. So I feel honoured that I have been appointed but heavily burdened with what I will have to deliver. But it is also challenging and I like to accept the challenge and ensure that the best is delivered.

* What about the high cost of living?

I would like to change the concept of the people on the cost of living. It is a fallacy if you say that you can reduce the cost of living. It is absolutely not possible. But controlling it is the main aspect. Now in this short run, we were able to control the cost of living by implementing a variety of new techniques. But you may not be able to do it everyday. However, I must thank the manufacturers, importers, retailers and producers for coming forward and reducing prices in many areas. 

The most important thing at this point is to get the people to understand that though controlling the cost of living may not be that difficult, reducing it is almost impossible and what ought to be done is to ensure that the earning capacity of the consumer goes up when the cost of living increases. So, our job is to ensure that they have a higher earning capacity. 

For example, if there is 10 percent growth that obviously means that there will be a 10 percent increase in expenditure. If your expenditure is only eighty percent of your income then twenty percent is savings. Now that is what is required and I expect the people to realise that we will do our best to ensure that goods at reasonable prices are made available to the public. But they will have to, in return, understand that it is not only controlling the cost of living that is required but also increasing the earning capacity of the people because at the end of the day, it is the gap between what is spent and what is earned that matters. They must also remember that this is a link ministry and if we do nothing when the ministry of finance imposes an additional duty of 15 percent, the impact will be on my ministry. So we have to remember that we are a team and move forward on that basis.

* What changes do you plan to effect in order to protect the consumer? Will there be any interpolations/amendments to the present Consumer Protection Bill?

Yes. I intend effecting changes because the bill that existed when we assumed office gave draconian powers to the minister. I think we must have a much more trade-oriented, friendly piece of legislation rather than having draconian legislation. 

I took away the right of the minister as well as the government to hold any monopoly. The government must also be able to say; "look I'm doing this for the electricity, health or petroleum sectors." Otherwise, owing to the inefficient and corrupt practices of one or two ministers the consumer will have to pay dearly. So I intend amending the bill to overcome these problems. Also the rebuttal process should be our responsibility. If you have to prove that somebody is wrong then it is our duty to prove it rather than let the manufacturers pay the penalty. 

So there are changes that have to be effected from an overall point of view. We also intend introducing very stringent sanctions against those who breach the Act.

* When do you plan to introduce this new Act?

At the rate things are going, I think it will be by the end of April.

* Do you feel that the consumer ought to be enlightened on the Consumer Protection Act and the rights that they are entitled to? Or, are you satisfied with the status quo?

I feel the consumer is being pushed against the wall and made to accept what is given. So I feel that consumer awareness is absolutely essential. My approach towards Sathosa was changed with these issues in mind. I want the Sathosa employees to get themselves mentally geared to serve the consumer well because I know how the private sector will react. Then we can tell the consumer that the choice is now theirs.

* What are your plans for improving the CWE system?

Firstly, I would like to bring in profitability to Sathosa. Next is to provide a better service to the consumer and keep sales outlets open 24 hours a day to ensure that the surplus staff is utilised gainfully. In this manner we want to bring value to this system. We are going to market pharmaceuticals, gas, telecommunications and garments in CWE outlets. So, what we have is a mall concept: a retail shop ending up as a mall. That's what we are heading towards. 

People ask me why Sathosa is open 24 hours a day and I say the idea is to transform it into a mall. We also intend increasing the number of items marketed at the outlets from 180 to about 500.

* On the subject of consumer goods, flour prices have always been a much talked about issue. What are the developments with regard to the Prima deal? Will the terms of the agreement be re-negotiated?

I'm particularly perturbed about the arrogant and autocratic attitude Prima has adopted. They may have succeeded in the past. They won't be able to succeed in the future. 

All I have to do is to ensure that the government's mandate to give the best deal to the consumer is executed. And my concern, in particular, will be the 18.5 million people and not one company. I'd love to ensure that the manufacturer enjoys all the benefits possible. But there should be decency. 

Competition is the best way. Monopolies should end. And that's how I'm looking at this whole issue. You cannot allow a company that has been sold without a tender, valued at 1/5th of the actual cost to create a monopoly, which basically does not permit anyone else to compete. That type of nonsense has to be eradicated. That is what we want to do. They (Prima) imports wheat, mills it here and sells the flour at a price that is higher than the price of imported flour. So we are deprived of giving it cheaper to the consumer because of the duty that is levied. 

Do you expect us to accept that kind of an illegal, corrupt agreement?

* Were the recent negotiations with India pertaining to the import of wheat flour intended in some way to break this so called monopoly?

No, it was a general tendency not to buy wheat from India. It was an opportunity that was available and the prime minister has used that opportunity for the benefit of the public.

* Another important issue is gas prices. Do you think there is a possibility of a reduction in gas prices? And how soon can we expect a reduction?

Certainly there is. The same theory that was explained with regard to Prima will be applied in this regard. There will be discussions with the Petroleum Corporation and one of the gas operators. And certainly they'll be given a fight and we will ensure that they give in. There will be a change by this week.

Construction industry down in the dumps

By Eddie de Zylva 

If one were to go through the subjects allocated to the new cabinet ministers, non-cabinet ministers and deputy ministers, it is hard to find a single ministry that is not directly or indirectly involved in the construction Industry.

The construction industry has been described as the "barometer for measuring the economy of a country". It has also been described as the "Bell-weather and balance wheel of the world economy". About 20 years ago the world generated over one trillion US dollars of construction work. In that same period in Sri Lanka, the construction industry contributed to some 28% of GDP.

Many analysts consider it the leading sector of economic development. Viewed as an industry it is the largest in the world economy. However, it is better viewed as a sector such as agriculture, manufacturing or services, measured either in terms of its share in total employment or its share of GDP. On the world scale construction engages tremendous human resources. Some 60 million people were engaged in the construction sector in the early 1980's and this segment is growing.

Construction activity also generates products of tremendous value. In the early 80's the global share of construction in world GDP was about 70%. Translating this into construction volume, it was about one trillion U.S. dollars.

However, the importance of the construction sector is not related to its size but to its role in economic development. It produces the facilities that house a wide variety of human activities as well as the infrastructure that connects these facilities into an increasingly complex network. Most importantly, the construction sector produces all the facilities needed for the production of goods and services starting from those needed by other producers and ending with those needed by the ultimate consumers.

The level of activity in the construction sector is closely related to the level of income in the economy as a whole. When total income is high, money is available to spend either privately or publicly on construction activities that satisfy consumer demands. At the same time, when income is high, a large percentage of national income is generally devoted to investment, much of which will be spent on construction projects.

On the other hand, investment in large scale construction projects, like industrial complexes, highways, railways, airports, harbours, dams, etc. supports economic development.

New construction usually accounts for 4-8% of gross national product and 40-60% of gross fixed capital formation. Building and construction materials in turn form 45-75% of construction outlay. There is not a single sector in national development activity where the construction industry does not play an important role as materials, such as bricks, tiles, cement, structural steel, timber, plumbing materials, etc, which are manufactured and used exclusively for construction.

National accounts normally attribute value added by such material production in the manufacturing sector and not in construction. If this component is also attributed to construction, it will be seen to contribute a larger share in the national economy.

However, despite this recorded economic and employment generation parameters, successive governments have failed to give the domestic construction industry its rightful place.

Thankfully, the new government has given peace efforts top priority. Presently a large percentage of our revenue - 60% to 70% - is used on the war.

One has to carefully examine the situation that would arise with even a partial achievement of peace and the reduction in war activity. The first major activity that will emerge from such a situation is obviously construction, particularly in the fields of rehabilitation, reconstruction and new constructions.

A large percentage of Sri Lanka's resources that is diverted to the war will then be available for these construction activities. In addition there is no doubt that foreign funding would flow in large volumes to meet the demands of construction that will be generated through peace and an end to the conflict.

In the latter 1970's and 1980's when the gigantic Mahaweli programme was condensed to a 5-6 year project from 30 years, the domestic industry was taken unawares, and thus was not able to significantly contribute to the construction boom, which resulted in the outflow of large sums of foreign exchange.

Take Malaysia, it has a strong Bhumiputra construction arm supported by the government while the same domestic support is given in Indonesia, South Korea, Philippines, India, etc. Let us take a cue from them even at this stage.

We have a strong domestic construction industry, in the way of engineers, architects, quantity surveyors, town planners, projects managers, technicians, etc. It is therefore imperative for the new government to immediately start assessing the volume of construction industry activities that could be undertaken by domestic players. It must listen to construction industry specialists and ascertain the needs of the construction industry if they are to give their best contribution to the development of Sri Lanka.

At present it is disheartening to see the construction industry, singularly and collectively playing an insignificant role in the eyes of politicians and economists. If the construction industry is to be revived and given its rightful place, then the new government must allocate the subject of the construction industry to a far sighted minister and his ministry should be identified as an apex ministry.

There doesn't appear to be any moves in this direction. The prime minister and the minister of economic reforms should give the construction industry top priority.