Tackling MNCs and consumer needs
By Naomi Gunasekara

  • In a recent interview with the Lankadeepa you had mentioned that the government was considering the introduction of a common gas cylinder to the market. Why do you think introducing a common gas cylinder is important? How will it benefit the consumer?

When we came in we found that Shell had a relatively good monopoly. It controlled about 85 percent of the market and obstinately held the price at Rs. 509 a cylinder. Lanka Auto Gas was getting into the market and selling at Rs. 409.

Minister Ravi Karunanayake

We tried to get them to reduce gas prices but they refused to comply. What they tried to do was block that way out. So what we tried to do was bring in competition.
So we thought of introducing a common filling operation where one would be able to go to any filling station and get a cylinder filled.

At the same time we were able to succeed with Munda Gas. They will be in operation from June and sell gas at Rs. 325 in Galle, Hambantota and Kalutara. In Colombo, a cylinder may be about Rs. 335. When they start we will have more competition coming in so that the monopoly will be broken.

The common use of a cylinder will certainly be useful because the consumer will be able to go to any filler and buy the gas.

  • Has this idea been communicated to the industry? What sort of response have you had?

We are not interested in what the industry thinks. We are only interested in what the consumer thinks. If he is happy, we are happy.

Gas monopoly

  • Will any legislation be introduced to eradicate the monopoly in the gas industry and impose some sort of control to provide the consumer with gas at a reasonable price?

My feeling is that regulations are self-defeating and bringing in competition is the need of the hour. Through that process you will be able to ensure a decent rate. Competition is the best way of eradicating price increases.

  • The budget proposal to impose a five percent tax on gas will undoubtedly increase gas prices. How do you think the consumer is going to cope with such an increase?

What we are trying to do is see whether there is an absolute necessity to increase gas prices. If the increase comes as a Finance Ministry decision then there is nothing that can be done. But I am trying to see that there is no increase.

It is a little premature for me to say what the impact of the tax would be, but my feeling is that there would not be any increase for the simple reason that the reduction in world prices will help us obviate a possible increase.

  • Why do you think it is important to establish a Consumer Protection and Fair Trading Commission? What will be its functions and how do you think it will help the consumer?

We want the consumer to come forward and say, "We also have a right" and exercise his right legitimately. When this is done the sellers and the manufacturers will not get the feeling that they can dump anything onto the consumer.

What we want is to ensure that there is a complete de-centralisation of the operation by bringing in consumer resistance and giving a legitimate right to the consumer.

The consumer is often taken for granted and that should be prevented through regulation. We are going to regulate services such as telephones, water and petroleum and beat government monopolies because there is no point in bullying five or ten private sector companies when the biggest offenders are the government sector companies.

Fair Trading Commission

If you consider petroleum prices, they were increased simply due to mismanagement of the previous administration. So those are the things that are going to be corrected when the Fair Trading Commission is brought in. It is not operational at the present. An Act will be placed before Parliament by mid-May.

  • You introduced the mall concept to Sathosa and kept them open round the clock. What has been the response to the 24-hour concept?

Excellent. I found last week that the cost of administration islandwide has reduced by 5.3 percent and the turnover has gone up by 18-21 percent. We have got a new market segment coming in and now there is customer confidence. People have the perception and confidence that we always provide a better deal.

If you look at any private sector supermarket and compare it with Sathosa there is at least a 15 percent overall price difference. So I guess the public is capitalising on that advantage.

  • What other development plans do you have for Sathosa?

When you say the 'mall concept' I am trying to ensure that we have airline counters, laundries, pharmacies, banks, bakeries, internet cafes, e-mail facilities, e-consultancy and courier packaging at Sathosa so that it becomes a one-stop shop for all your needs.

That is the concept that is developing and it should generate consumer loyalty that will help in the long run. We feel that Sathosa can diversify into providing other services. The only problem we have right now is that our staff is not adaptable to the changing environment. That is our biggest drawback. What we intend doing is using the private sector knowledge to overcome these problems.

Expand Sathosa

  • Are you planning to recruit any private sector oriented staff in order to expand Sathosa and overcome problems with regard to the adaptability of staff to a private sector environment?

Yes and no. Because of the over-staffing situation we are not planning to take in new minor staff. We have hundreds of peons and labourers when we require managers and assistant managers. So when it comes to managers and assistant managers, we will certainly have to look at recruitment but in the other area we will have to increase the labour-intensity operations and overcome the problems by converting them commercially instead of sending them home.

  • How long will it take for such a transformation to happen?

The transformation is already taking place but the private sector fusion will take three to four months more. We don't want to just get any party. We want to get the best and ensure that he is socially responsible.

We are not going to privatise the whole of Sathosa. We are only going to form a new subsidiary for Sathosa Retail. It will have all retail outlets linked up to the subsidiary and the service providing aspect will be privatised.

So it is not Sathosa privatisation that we are talking about but a strategic partnership because we believe that it is essential for us to have Sathosa Wholesale, Sathosa General, Sathosa Retail and Sathosa Distributions for purposes of social responsibility.

The aspect we are looking at for privatisation is Sathosa Retail and 60 percent will be held by us and 30 percent will go to one major strategic partner. The other 10 percent will go to each of the service providers. So it is this 30 percent that we are talking about. It has no assets - it is only the trading arm that will be given.

New Consumer Protection Act

  • Your ministry has a mandate to deal with matters relating to commerce and consumer affairs, export and local trade, marketing, consumer protection, intellectual property, Mahapola and the department of internal trade. Which are the areas that need immediate attention? What will the changes be?

Like you said, this ministry has no beginning or end. Everything that is related to trading and everything that is not so related come to us. But one of the main areas my ministry is concerned about is consumer protection and we are going to bring in a new Consumer Protection Act. Registration of Companies also comes under my ministry and a new Act will replace the existing one.

Salu Sala is certainly going to have a new orientation. A defunct company at the moment, it will be converted and made to compete with the likes of Odel and House of Fashions in order to serve the consumer better.

Lanka General, which is looked at from a general items point of view like electronics, and CWE, which is looked at in a consumer point of view, will be joined with Salu Sala to introduce a hypermarket, which will be like a huge shopping mall. And this will be established at the Sathosa warehouse at D. R. Wijewardene Mawatha.

Then we have Mahapola, which was started to help and nurture children. I would like to look at it from an educational and training point of view. Then there is intellectual property, which is another important area. We will bring in legislation that is in line with the region and derive maximum advantages to our country.

Nurturing new talent

Sri Lanka Inventors' Commission also comes within our purview and we are looking at nurturing our talent. We have a lot of good talent but unfortunately they are not nurtured and we are going to bring out this talent.

Then we have the Department of Commerce. My feeling is that it is a gold mine that has been totally neglected. We will be completely re-orienting the Department of Internal Trade and Commerce and have directors stationed here dealing with internal trade.

We will also have permanent people abroad who will look into matters overseas. That's going to be the change. We are also going to have a very proactive approach. At the moment we have a very introverted approach and we want to change it.

Through this process, my belief is that we will have a very strong and responsive Department of Commerce, which will have every single exporter, manufacturer and service provider linked to the web.

  • You had admitted that there is widespread corruption in most of the trading institutions that came within the purview of your ministry. What steps have you taken to curb such corruption? How successful has your attempt at eradicating corruption been?

I introduced this system where I and the heads of the institutions that come under my ministry can be probed by the media. We also have an internal information system which helps us to decide how to improve existing systems and practices.
When I say that it is utterly corrupt, there are things that have gone on that's unbelievable.

What could be bought for one rupee is bought for fifteen rupees. What could be sold for five rupees is sold for fifty cents. All these things are judgmental factors and the offenders will give various excuses like 'the food was not good' or 'the commodity was not good'.

All those processes are being looked at and people are being held responsible. If a guy has bought something for five rupees and if he can't sell it at six, why should he be here? So we tell him that we don't need him.

We have basically been having a very hard look at things because we find that the system from top to bottom is in bad shape. We want to ensure that this type of nonsense does not go on any longer.

Open economy

  • In dealing with consumer affairs, one of the problems that often arise is maintaining a balance between the demands of the open economy on the one hand and adopting a national-minded approach on the other. How successful have you been in maintaining this balance?

Being the minister of trade and commerce I have a twin problem. One is ensuring that the domestic industry does not get wiped out and the other is ensuring that the consumer gets a decent rate. Look at a commodity like potatoes: we can import it and sell it at Rs. 35. but the local producer sells it at Rs. 50. Are we going to cut off the local producer and say 'go to hell' or are we going to protect him?

Assuming we cut off the local producer, if the exchange rates keep fluctuating we will be at a disadvantage. Also if there is a war or something we will get affected. The next thing is that we will lose out on the rural economy.

That is where the balance is required and we thought of considering the equitable return to the farmer in deciding on the prices. If you look at rice, we can import rice at Rs. 13 and sell at Rs. 21 but the cost of production here is Rs. 27. The prime minister, agriculture minister and myself sat and discussed what the national policy is in this regard and we will decide on it soon.

  • What changes do you foresee in the area of international trade that will affect Sri Lanka?

On the one hand we have countries like China, Indonesia and Vietnam standing against us while on the other we have a very liberal and proactive government that is willing to challenge the rest of the world in order to ensure our manufacturers are given an opportunity (to compete).

The opportunities that are there for the private sector are very risky and that is one of the main problems that we have. So we are hoping to encourage the private sector by getting them the benefit of multilateral, bilateral and free trade agreements in order to ensure that we get in there. They know that the government is serious and we have a coherent, consistent policy. Once our work is done, it is up to the private sector to get the engine moving.

If the private sector does not come in we will ensure that foreign direct investments come in because we must have a growth rate of 10 percent within the next two years and to get that we have to be really vibrant.

Indo-Lanka pact

  • Is your ministry planning to re-negotiate the Indo-Lanka Free Trade Agreement in order to help Sri Lanka gain more benefits from the agreement? What changes are you looking at?

The two prime ministers of India and Sri Lanka have such a good relationship that it has made our life easier. What happened in the past was that India did what was good for them while unfortunately our predecessors also did what was good for India. We have been discussing this and there has been a very good response from the Indian embassy and the Indian government. We appealed for equal benefits.

  • You had said in a recent interview that "my job is to ensure that the consumer is king". Are you satisfied with the services received by the consumer? How do you propose to ensure that the consumer remains king?

The consumer is treated on a take it or leave it basis. When the Consumer Affairs Ministry was created by the prime minister, there was a necessity to look into the consumers' needs first. We revolve around the consumer and our policies should be consumer-led rather than government-led because the consumer is the final decision maker.

Just as companies are held responsible to the stakeholder, we are held responsible to the stakeholder who is the voter, so we believe that a consumer-oriented policy will certainly be for their betterment and we design our policy on that basis.

There may be certain areas where we will have to take a lead and say this is the way to do things. For example, if people are drinking polluted water we will have to say, "look you'll have to pay five rupees more but drink clean water".

Now that is a policy change. Otherwise we will have to look at consumer-led development.

  • You had also expressed a desire to deregulate labour markets and generate new employment opportunities?

As a government we have a responsibility to create employment. But our present laws are archaic. We need to create jobs by having a more proactive policy.

Labour laws

  • Does this mean that any changes will be made to the existing labour laws?

From a job creation point of view, yes.

  • In retrospect, what do you feel about your achievements during the 100-day programme?

I am certainly happy that we have been able to put the ministry on the map. I would have loved to have done much more although we are well ahead of what we had planned to do.

We were going to do 15 projects but we have done 25. But coming from the private sector I would have been happier had there been a more coordinated approach from the bureaucracy.

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