The closing date of expressions of interest to sell the state owned 60% of Pugoda Textile Mills has been extended till January next year in view of the lucrative concessions granted to the Textile industry by the 1998 Budget.
The Public Enterprises Reform Commission (PERC) has already received proposals from three local companies of whom two are foreign collaborations, Mano Tittawala Director General PERC told Sunday Times Business.
Although the applications closed before the budget the technical evaluation committee at PERC has recommended that the advertising for expressions of interest be continued internationally to attract more investors in view of the Budget proposals.
Pugoda is one of seven State concerns that were re-vested in the Government by a special act for the same in the middle of this year.
The other companies that were re-vested are Mattegama Textile Mills, Hingurana Sugar, Kantale Sugar, CCC Fertilizers, Lanka Loha and Kahatagaha Graphite.
Proposals also have been called to sell Hingurana Sugar Co., Kantale Sugar and Co. CCC Fertilizers and PERC hoped to finalise them by March 1998, Mr. Tittawala told Business Times in an exclusive interview.
PERC is about to finalise the sale of Lanka Loha Ltd. to Hungung Corp. Ltd. the Korean Co. who bid successfully for the Ceylon Steel Corporation Ltd. in December 1996, he confirmed
The employees have been offered voluntary retirement and only seven people have stayed with the company, the DG said. In the meantime, PERC is lining-up the plantation companies for the next offer for sale. Sunday Times reliably learns that it could be either Madulsima, Balangoda, Uda-Pussellawa or Hapugastenna.
They will be followed by Namunukula, Elpitiya, Kahawatte, Mathurata, Agarapathana and Malwatte Valley.
Mr. Tittawala also said that the employee share of the plantation companies will be given to them by the end of this year and by the middle of next year the government hopes to sell off the balance share of the government's holding keeping only the voting share to itself.
He added that by March next year the rest of the Plantation companies
too would be listed in the Colombo Stock Exchange. Nine companies have
already been listed.
The impact of the East Asian and South East Asian crises looms large in the minds of businessmen. The question that is being asked is whether Sri Lanka would suffer a similar fate. Will there be an erosion of our foreign exchange resources? Will our trade be affected by the competitive devaluations in the region? Would foreign investments in Sri Lanka decline as a consequence?
Most of all, businessmen are worried as to whether Sri Lanka's rupee would be devalued as a consequence. This despite assurances by the government that it would not occur.
Sri Lanka is insulated to some extent from an erosion of foreign exchange reserves by the non-convertibility on the capital account. Although this provides a degree of safety, one has to realise that there are devious methods like under-invoicing exports and over-invoicing imports by which capital is in fact remitted.
Whenever there is speculation of a currency devaluation there is a tendency for foreign exchange outflows to increase or capital inflows into the country to reduce, or both.
The concern with respect to our exports is not without reason. It applies perhaps more forcefully to our industrial exports than our agricultural exports. This is because many of our industrial exports, particularly the export of garments, ceramics and rubber goods are extremely competitive and the devaluation in neighbouring Asian countries, including India, could reduce our competitiveness in international markets.
Unless we can improve our productivity and keep wages low, our competitiveness in international markets may very well be affected. A mitigating factor is that many of our industrial exports are so highly dependent on imports of raw materials, other intermediate imports and machinery that a devaluation could itself increase our cost of production as well.
Yet there are industrial exports like ceramics which have a high value added component but face severe competition from Asian countries. These could be adversely affected.
Our agricultural exports will not be unaffected. The Indian depreciation of the currency bringing it to more than Rs. 40 per US dollar has changed the relative values of the Sri Lankan Rupee vis-a-vis the Indian Rupee. However the main competitive agricultural export, tea, is less vulnerable than most people would expect.
Although India continues to be the largest producer of tea it does not dominate the export market owing to its large domestic consumption of tea.
Kenya and Sri Lanka dominate the international tea market and as such India's depreciation may not affect tea prices very much. Besides this, the uptrend in tea prices offers the industry the possibility of coping with a reduced international price.
The situation with respect to rubber is different. Sri Lanka is a small producer of rubber while Indonesia and Malaysia hold the lion's share of rubber export markets. Two factors are however favourable to Sri Lanka. Sri Lanka continues to produce much more traditional types of rubber while South East Asia has moved into technically specified rubbers.
Also it must be remembered that we now consume around one fourth of our rubber production in domestic industry. Yet the threat to our rubber industry by the East Asian devaluations is such that the international price for rubber has plumetted and industrialists are importing rubber for their manufacture. This could be serious to our rubber industry.
There is little doubt that the investment flow will be affected. This is owing to two reasons. The first is that Sri Lanka was attracting more investments from East Asian and South East Asian countries recently and there was the prospect of larger inflows of investment from this region.
The devaluation of these currencies means that their funds would be worth less or conversely they will have to bring in more money to make the same investment. Secondly, the general disillusionment with Asia may mean that Western capital too would trickle in rather than flow into the region.
The devaluation would make the lesser capital inflows to move into the devalued countries rather than come to Sri Lanka as moving into the devalued countries would be relatively more attractive.
Given our security situation and the greater attractiveness of investments in the region owing to the devaluation, we cannot expect to fare well in attracting foreign direct investments. This is a definite setback to our economic growth which is very much dependent on increased foreign investment.
There can be little doubt that on balance the setback to the economies of Asia would affect us adversely. Yet to interpret the setback as a permanent one or a crisis that would not be overcome is a pessimistic view indeed. We have seen how the Mexican economy revived within two years.
Where the Asian economies are concerned, it is an opportunity for them to correct some of their weaknesses such as reducing the dependence on foreign funds, the curtailment of ego boosting but unproductive large projects, deficiencies in the banking systems and consumption by the richer classes.
If these weaknesses are corrected, the strength of these economies would once again come to play and rapid economic growth is likely.
The strengths of the economies include their high level of domestic savings, a good work ethic, a well developed infrastructure and a strong will for economic growth. They may not grow at 8 to 10 percent per year, but a 5 percent growth is still realistic to expect.
We would need to monitor the impacts of the Asian crisis and the emerging
developments to take appropriate policy measures to ensure they do not
have adverse effects on the Sri Lankan economy.
I read an article written by Suzanne Goldenberg, first published in the "Guardian Weekly" that appeared in your newspaper on December 14 titled "Govt. urged to strike a balance" and confess it made interesting reading.
The article claims that worker rights are forfeited in preference to foreign investment, that Unions are banned, that working conditions are appalling, that factory worker harassment is the rule rather than the exception and insinuate that garment factory workers are generally exploited in Sri Lanka.
In short, the article states all that is negative and is a prime example of what the European press has become famous for, the world over in the recent past.
It is quite clear that the purpose of the negativity and untruths is to discredit the Apparel Industry in Sri Lanka in preference to our global competitors. Does Ms. Goldenberg not know that many garment buyers stipulate working conditions in their contracts which factories must adhere to strictly, when producing their orders?
Does she not know the difference in worker conditions that exists in sweatshops of the UK and garment factories in Sri Lanka?.
I wager, that either she has not been to a sweatshop in the UK or never visited a garment factory in Sri Lanka. One also wonders why the names of the people interviewed have been changed.
It is because Sri Lankans are viewed by the likes of the Goldenbergs to be an archaic and primitive lot, ever ready to do untold damage on all those who criticise. Or is it because such interviews never took place and the article is based on the figment of Goldenberg's biased imagination.
The report is generous on the volume of coverage given to the Katunayake Free Trade Zone and a few other isolated factories around Colombo. Ms. Goldenberg had not seen it fit to visit the numerous factories scattered across Sri Lanka.
Unions in Sri Lanka are not banned. The workers of companies located in the FTZ will testify to this. There have been many instances where workers have resorted to industrial action in support of their claims within the FTZ. As in any civilised society a solution was found through arbitration.
Has Ms. Goldenberg forgotten the then British government's attitude towards unions? Does she not remember her government exercising their full authority in crushing the NUM ( the Mine Worker's Union) and SOGAT, (the Print Worker's Union)?
In contrast, the government of Sri Lanka have pledged to uplift the social status of all workers in Sri Lanka.
The article reports that the benefits for Sri Lankans are relatively slim. Does she not realise that due to the garment industry over 600,000 people have gained employment either through direct employment or by the creation of extra jobs in the support, affiliated and value added services. Does she know that the foreign exchage earned by garment exports exceeds £ one billion for 1997 and is more than half the total foreign exchange earnings to Sri Lanka.
It is established the world over that most organisations employ rigid security measures when entering or leaving their premises. Employees are also required to carry their identification card inside their place of work.
Can one, for instance, walk into the Ford car plant in Dagenham or the nuclear power plant in Sellafield without having to pass through security? Why then, does she make it sound so wrong when the same practice is followed in Sri Lanka?
Contrary to what appears in the article the average basic monthly wage amounts to around £38. In addition, workers receive various allowances, including overtime and an average garment worker takes home around £55 a month. Most factories provide free meals on working days.
If this comparative low wage is worker exploitation, then are the British workers exploited if compard to wage earners in say Japan? The answer quite obviously is no. It depends on the power of that country's currency. It is an established fact that the cost of living in Britain is far, far greater than in Sri Lanka.
The cost of shopping in Sainsburys or Waitrose will cost 8 to 10 times more compared to the same items purchased here.
With regard to the "needle piercing the girl, aged 22" compensation is in most cases given for accidents at the work place. Most factories have taken insurance policies to cover worker compensation. It is rather surprising to note that this operator was granted only 3 days paid leave.
I suggest that your journalist report this incident to Sri Lanka's Labour Ministry. And what was the Management's point of view? Why were they not interviewed on this incident? Is it because it did not suit her purpose?
A 14-hour day is very rare, and never continuous. It may happen on occassions when the production schedule is very tight and delivery extensions are not negotiable. Sri Lanka's labour laws require that employees must consent in writing, when asked to work excessive hours. It is also mandatory for employers to provide meals and refreshments for all employees working long hours.
With regard to the high cost of accommodation, Adam Smith's principle of Supply and Demand probably has a hand in this. Accomodation is at a premium in the erea bordering the FTZ, and unscrupulous landlords are probably taking advantage of the situation.
One finds everywhere, immoral and unethical people. These are private landlords and determining boarding house rental is unfortunately, out of the control of the garment industry.
Ms. Goldenberg seems to change her line of thinking when it suits her. At first she laments that workers are underpaid in Sri Lanka when compared to those in the western world. Then she says that £10 a month is exorbitant room rent. Where in the west can one rent a room for £10 a month?
The article states that there is a social stigma associated with garment workers. "So great" the article continues, "is the stigma that matrimonial advertisments often stipulate: No factory girls." This is to be scoffed at and not worthy of print in your newspaper.
Many factory girls are the sole breadwinners in their family. They take their work and personal commitments very seriously and carry their responsibility with pride. Would it be better to be on the dole as is in the UK?
Ms. Goldenberg should have visited more factories in Sri Lanka. There are nearly 800 garment exporting factories all over the country. Many provide accommodation to their employees. Mr.Peter Nygard, Chairman Nygard International, the leading garment manufacturer in Canada, commented during his recent visit, that some of the factories he has seen here could compete with the best in the world. He should know, Nygard International sources garments from all parts of the world.
It is a pity that her biased mind allowed her to see only what she wanted to see. All the positives that Sri Lanka has to offer those seeking employment were ignored. The concept of taking the work to the people was not even mentioned in her article.
Unlike other developing nations, where people from all corners of the country converge to the Capital in search of employment, Sri Lanka has had the foresight to take the factories to the villages.
Foreign investment is an important pre-requisite to make this concept sustainable and have long term effect. The government however, does not "always side with these investors" as stated in the article. There are stringent labour laws that all entrepreneurs have to follow.
In fact the government damands that more facilities be given for those employed in factories operating in village areas. For e.g. The Deputy Finance Minister in his budget proposals 1998 speech permitted the opening of another 50 factories.
A proviso for eligibility is that all employees must be provided transport to the closest bus terminal in addition to all existing facilities.
As in my democratic country, instilled in Sri Lanka's constitution there are both employer and employee rights. There is room for improvement and every endeavour must be made to achieve the right balance. The search will be never ending, as there will always be room for improvement due to the rapid advancement in technology and the continuous changes in working practices.
It makes humanitarian and economic sense to strive for the ideal combination, regardles of the improbability.
However there cannot be one system of rules and regulations of labour laws followed by the whole world. The same system of labour rules practised in the UK cannot be adapted here due to cultural differences, taste variations, purchase power anomalies etc. Surely Ms. Goldenberg must know that.
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