7th April 1996

Resume privatisation, say planters

The Planters Association of Ceylon (PA) is making representations to the government to speed up the privatization of the remaining plantation companies, a top official said.

"High interest rates are preventing capital investment. Asian Development Bank loans at concessionary rates of interest are available only to the privatized Regional Plantation Companies (RPCs)" PA Chief Mahendra Amarasuriya said.

To qualify for financial assistance, 30 per cent of which came in the form of a grant, he said the remaining nine companies out of a total of 23, should be transferred to the private sector as soon as possible.

"We will request the President and the Public Enterprise Reform Commission to expedite the privatisations", Mr. Amarasuriya said. The government had previously halted the process due to questions being raised about certain transactions that were carried out by the buyers of companies with some companies being sold to third parties resulting in huge capital gains.

Mr. Amarasuriya said he hoped the government would resume privatisations once the loopholes which permitted questionable deals were eliminated.

Planters Association officials said the management companies were unable to comply with trade union demands for a Rs. 8 per day increase in wages and a 300 day guaranteed period of work per year. The Sri Lankan plantations had the highest cost of production and the lowest yield in the world, compared with competitor countries such as India, Kenya and Papua New Guinea, despite some headway being made under privatized management.

In Papua New Guinea tea plantations yielded in excess of 3,500 kilograms per hectare compared to1200 kgs pr hectare in Sri Lanka, the newly appointed Secretary General of the Association S.K. Seneviratne said. He had earlier been a Director of the State Plantations Corporation. Mr. Seneviratne had only recently returned to Sri Lanka after seven years in Papua New Guinea where he last served as the General Manager of the Warren Group of Plantations.

Mr. Amarasuriya said though they were prepared for a strike, the management of the various companies were hoping to come to a settlement with the trade unions led by Minister S. Thondaman. "We will take action to safeguard the assets of the RPC's which are given to us on a 50 year lease and also our employees, especially managers. But any strike will result in financial loss to the companies, lost production to the country and foreign exchange losses", Mr. Amarasuriya said.

Mr. Amarasuriya said already they had implemented a scheme where workers were paid higher remuneration based on the average market prices of tea. Some tea plantations workers received as much as Rs. 8 per day as a result of the high prices now commanded by tea and rubber, officials said.

"So we are sharing the benefits of the increased prices with the workers", pointed outgoing Secretary General Sepala Ilangakoon.

Officials said it was not correct to compare the salaries of factory workers with plantation workers because many benefits were provided to the plantation workers which were not given to employees in other institutions Though the daily wage amounted to Rs. 72 (Rs. 83 with EPF and ETF) the RPC actually incurred as much as Rs. 115 per employees by providing free housing, medical benefits, creches with free meals for children in some cases, maternity and funeral benefits.

However, Mr. Amarasuriya said Minister Thondaman had agreed to shifting workers from plantations with excess labour to those that had shortages, provided certain benefits were given. Once the excess labour problem had been cleared up he said the question of wage increases and guaranteed period of work could be taken up. "The Rs. 8 per day increase would cost the plantation companies an estimated Rs. 3000 mn per year," he said. This would result in most companies running up huge losses.

Economists take private sector to task

It has been accepted by the main political parties that the private sector should be the engine of growth. That said, it is pertinent to ask whether the private sector has, as matters stand at present, the capability of performing the role assigned to it. Is it organised to fulfill its designated role? What are its deficiencies and the constraints it faces? What are the changes required, if any? And what is the part the Government should play? Should it adopt a "hands off" policy? These and many other questions were discussed at the Tenth Annual Sessions of the Sri Lanka Association of Economists recently by a distinguished array of participants. The theme was "Gearing the private sector for its lead role in economic growth."

An important view put forward was that the private sector should have a vision. Before it forms a vision for itself it should sort out its priorities. A speaker held that there should be a shift towards industry, but not to the neglect of agriculture.

There should be a progressive development towards high-tech industry, but unfortunately the lack or paucity of infrastructure facilities could be an inhibiting factor. There should be a thrust, in the context of the growth imperative, towards export orientation. It was observed that the Asian "tigers" had progressively increased its share in world exports in pursuance of its development strategy. A point made was that there could be conflicts between the requisites for economic growth and pollution generation which need to be addressed.

It was emphasized that productivity cannot be achieved without profitability and as regards productivity itself it was essential that there should be a measurement of productivity. The profit motive was considered to be the essence of the market economy. Having got itself a vision and sorted out its priorities the private sector should formulate an action plan with which it could make an approach to the government.

In regard to the weaknesses of the private sector, it was contended that the sector is under- capitalised because of high gearing, is apt to have a short-term mentality which prevents it from taking a long view, consisting as it does largely of family concerns with narrow perceptions, uses out- dated technology and undertakes insufficient research activity. It was suggested that the private sector should get more group oriented instituting more chambers of commerce which would in turn give the private sector more clout in its ability to influence the government.

On the role of the government it was stressed that there were too many procedural arrangements and a lack of co-ordination in government-private sector relationships. There was no institutional set- up which would facilitate the consultation process between government and private sector.

The National Development Council in Malaysia was cited as an excellent example of such an organization. The National Development Council of Sri Lanka has yet to activate itself. The government's principal role should be to provide a stable macro-economic environment, which would induce private sector investment. The private sector should have the government's assurance that it would be able to function in a policy framework conducive to private sector growth.

Presentations were made by Dr. Howard Nicholas and Ranjith Fernando, while Dr. Saman Kelegama, Arjuna Mahendran and Chandra Jayaratne were the panelists in a panel discussion with Dr. W. M. Tilakaratna as moderator which followed the presentations. Dr. Nimal Sanderatne presided.

The seminar provided a timely discussion of the pre-requisites for private sector development and of the government's role in that process to enable the private sector to play its part as the engine of growth.