30th June 2002, Volume 8, Issue 50















“How can the causes of ruin, now question us?”

If there is no consumer, there is no business,” Commerce and Consumer Affairs Minister Ravi Karunanayake said last week. He said though the United National Front (UNF) government could not completely bring down the cost of living, the government has been able to give the people some relief. “Let me put it this way. Just imagine that a patient has been brought to the ward from the Intensive Care Unit (ICU). This is what has happened. The PA put the economy in to the ICU, and within six months, we brought the patient to the ward. Very soon the patient would be cured,” he told The Sunday Leader in an interview. The minister said, “We will make the consumer the king.” Talking about the PA’s move to bring a no confidence motion against him, Karunanayake said he is not bothered. He said it is a good opportunity for him to tell the PA and the country why the cost of living is high and who should be held responsible. “I am waiting for a chance to expose the previous regime. And I shall take this opportunity,” he said.

Following are excerpts.

By Wilson Gnanadass

Q: There is an unprecedented increase in the cost of living after the UNF government came to power. Is not the government planning to control it?

A: The cost of living reduction is a difficult subject. This is a very big problem. But let me look at this in this perspective. Prior to the election, we said that the economy was in dire straits. We also said we were inheriting a totally messed up economy. We never imagined that the mess was so deep. The previous government has lied to the nation even to the extent of concealing information. When the People’s Bank, a government owned bank was taken over by the PA, it’s net liability was in the range of Rs. 35 billion. And now it is Rs. 95 billion. The net liability of Bank of Ceylon which is another government owned bank, was, according to the PA,  Rs. 22 billion. But it is now Rs. 53 billion.

Likewise, every area has been scraped to the very bottom by the previous regime. With this situation, can we go before the public and say, ‘Look here, we have had a miserable seven years of PA regime and that is why the cost of living (CoL) is high.’ No. We are not going to say this. As a responsible government we are going to move forward. It is like a relay. The baton we took over was hot and rotten. And therefore we are having a miserable time. This does not excuse us from not bringing the CoL down. We as a professional team are putting the economy in order first. Then we will increase economic activity so that there would be increased earning capacity.

We are not going to make a mockery of ourselves by saying that we will bring down the cost of living.

Q: The UNF has completed almost six months in power. How many more months do you need to put the economy in order and bring relief to the consumers?

A: I understand that six months have passed. But it is six months after seven years of miserable mismanagement by the previous government. Time is critical. We are not going to run away from this mess. We have to carry on the legacy that has been passed down the line to us. When the UNP handed over government in 1994, the total liability per capita or public debt per person was Rs. 29, 000. Then, when we took over again from the PA on December 5, 2001, we were in debt up to Rs. 95,600. The complete public debt was Rs. 541 billion in 1994. Today it is Rs. 1,541 billion.  The public debt as a percentage of GDP when the UNP handed over government in 1994 was about 91 per cent. Today, it has gone above 100 per cent. That means we have more debt than the GDP of the country.

I understand that from a consumer’s point of view, this may sound useless. But we are doing our very best. What I am trying to say is that with the economy that was handed over to us in December last year, we have been able to avert a situation like in Argentina or Venezuela. It is like bringing a patient out to the ward from the Intensive Care Unit. I think the people must understand this and be happy about it. At the end of the day, we have been able to reduce the prices of milk powder, gas and sugar. So, we managed to do something in the areas under our control.

The Consumer Affairs Ministry is the undertaker of all the other ministries. Whatever the other ministries do that will affect the consumer, we become answerable. Anyway, under any circumstances we will make the consumer the king.

Q: The PA has also threatened to move a no-confidence motion against you, based on the rising CoL issue. How do you intend facing this?

A: I am very happy that the PA has decided to move this motion because this will help us to highlight as to why we are in this situation. I am waiting for a chance to speak on this. The prime minister and government have been decent enough not to tell the public what the previous government had done during the past seven years. Or for that matter, what my predecessor has done. The president and her government at that time spent billions of rupees to import luxury vehicles. And at this moment the president has even lost her memory as to what has happened to these vehicles. Then there was the Katunayake express highway that cost five times more than the normal cost. The People’s Bank, just one day before the election, signed for Rs. 2 billion. When a small calculation is done, a sum of Rs. 11 billion has been spent on unwanted things. 

Certainly, the PA will be startled to see what they themselves have done during the period of their regime.

Q: Did not the UNF government give the people a solemn promise to bring down the CoL prior to the elections?

A:  We did not say that we will bring down the CoL. But we did say that we will give the nation a better tomorrow. Today, the government’s revenue is Rs. 242 billion. Of this amount, Rs. 110 billion is used for debt re-payment and interest payments. Then Rs. 32 billion is used for pension payments. The government salaries and wages go up to Rs. 111 billion. It is clear that our expenditure is above the revenue. But the average consumer does not believe in these figures because he/she wants comforts at the end of the day. 

Why do you think the power price has gone up? The previous government bought a unit from a company which sold at Rs. 12.40. And we bought a unit at Rs. 7.40. Now what has happened to the Rs. 5.00? This is what we ask the president. In fact the Power and Energy Ministry was run by her own uncle.

Q: In 1994 when the PA came to power it blamed the UNP’s 17 year regime. Is this government also trying to do the same thing?

A: No. This is not what we are trying to do. The PA ruled for seven years. Did the party implicate one individual for any crime? All they did was point fingers at the party and not pin-point any individual. But we have pin-pointed individuals. There is no necessity for us to talk of the past but as you opened the subject it becomes necessary for us to take the previous regime as an example. 

Q: The peace process is seemingly heading for a breakdown with the LTTE saying that some of the provisions in the MoU are not being implemented by the government. What in your view has gone wrong?

A: Frankly, being in the government it is not my intention to speak on a subject which does not come under my purview. But all I could say is that it is in the safe hands of the prime minister. And I believe that we cannot be accused of not complying with the provisions of the MoU. That is all I could say and I know that periodically we are kept informed about the process.

All I could say is that we are moving in the right direction. But the opposition shows a negative picture to the country, but, that is alright. We know what we are doing. Even with all the aspersions cast at us regarding the peace process over the last six months, not a single bomb has exploded in the country. Also we cannot expect the LTTE that has been fighting from the jungles for so many years to come to the democratic process and behave as if they were born yesterday. It will take time for all of us to move towards the right direction.

Q: India keeps pressing for the extradition of LTTE chief Prabhakaran. Do you think India could be a stumbling block to the peace process?

A: Recently, I visited India but I was more involved with economic issues than the peace issue. I am sure the Indian premier would have discussed this matter with our prime minister and I don’t want to comment further on this subject. But India, I must say has had a complete change of heart. We had a cordial discussion and issues which normally take a year to discuss were discussed within hours. And within another one month we will have an Indian delegation coming to Sri Lanka. We must now convert aid into trade. Trading is the only answer to most of the economic problems we face.

 If we do not have domestic savings, if we don’t have technology and if we don’t have a market and if we must convert our unemployment into employment, trading is the answer. If Sri Lankan investors are rather slow in starting, then obviously the next alternative is to go for the second market, create jobs.

Q: Recently, former Speaker Anura Bandaranaike and former Minister Mangala Samaraweera were seen on the JVP platform. Does the UNF government consider the PA-JVP alliance a threat?

A: The names mentioned are of no serious political importance. We don’t understand as to how the PA and the JVP, the elements that basically ruined the economy, are coming together and questioning us after six months. The PA and the JVP, in my view, are the causes of the problems in the country and now they are questioning us. So we do not care for them. They are no threat to us. They are a threat unto themselves.

Q: The PA also has planned to move a no-confidence motion against the interior minister over the recent spate of crimes in the country. We are also told that there are 50,000 army deserters roaming about with weapons. How is the government going to address this problem?

A: Crime is a barrier to economic progress and therefore we must eradicate this menace. And I am sure the relevant ministry is taking steps to look into this matter. We have to increase the economic activities in the country and then through that try to eradicate this problem.

Q: Are there job markets for all these people?

A: This is why we say that the private sector should come forward. Today, we have chambers that talk of foreign multi-nationals instead of protecting our local industry. 

Q: The paddy farmers say that the price a kilo of rice is purchased by the government is low considering the present high CoL. Do you see this as a major problem?

A: I am sure our farmers must be producing with their Benzs and BMWs if they are expecting any higher price than what they are getting now. Today, the consumer is paying for the inefficiency of the farmers. After we came to power we started to purchase rice at the rate of Rs. 13 per kilo because we wanted the rural economy to get a kick-start. Now we have also contained our selling price at Rs. 25, 26 or 27. To be very frank we could import rice from India or Pakistan and ensure that rice is sold at Rs. 18 or 19.

Q: There is no proper security for investors and they complain that the interest rates in the banks are so high that they are unable to obtain loans for business ventures?

A: I think we have to seriously think about this issue which in my view is a serious one. Today, we have banks lending with an interest rate of 17, 18 or even 19 per cent. In India, it is only 8 or 9 per cent. I don’t understand what is happening in this country. The rural folk come and deposit and get a saving rate of seven per cent. And these banks lend to investors with an interest rate of  17 to 18 per cent. Now this ten percent is criminal. Why do you think this is happening? Because there is such a lot of bank debts. The banks’ debts are colossal. We have Central Bank reserves at 13/14 per cent. So all these reserves basically have a cost of capital to the bank. We must eradicate this.

We must have a restructuring unit to restructure the banks. We should not let this country  go in to the hands of gun toting and undemocratic parties. We give tax exemptions, amnesties and so on and so forth and the investors must come out with it. We have also lost a generation or two due to bad management and politics in this country. We must try to encourage the younger generation to invest in Sri Lanka and we will ensure that they are not let down.

Privatisation has succeeded

"Negative effect in employment has been minimal subsequent to privatisation. With the increase in efficient utilisation of capital and labour and quality management and technology, employment opportunities should improve," said Director General, PERC, Deepal Goonarathna, in an interview with Dinesh Weerakkody. Following are excerpts.

Q: What is the government's policy on privatisation?

A: The government's role in commercial activities is to be minimised. World over, the governments are disassociating from commercial activities to provide for increased private sector participation. The private sector is considered the engine of growth.

Q: Why has it become necessary to privatise government institutions?

A: It is not only due to economic compulsions, although it is a major reason.

But the government wants to create additional space and provide an increased base for private sector participation in production and distribution activities.

Obviously, the sale proceeds will easen the burden on the national budget by way of expenses and increase the base for taxes for future income collection. The divestiture proceeds could be applied to reduce the domestic borrowings.

The most significant would be that new investors would be able to bring in value addition by providing a new business vision in the hands of the private sector.

Q: What are the institutions that are up for privatisation this year?

A: Sri Lanka Insurance Corporation Ltd., Lanka Marine Services Ltd, balance shares of National Insurance Corporation Ltd., balance shares of Shell Gas Ltd., public private partnership in the bus sector, management contracts are being worked out for the National Lotteries Board, share sale of Elkaduwa Plantations Ltd.

Among the completed transactions in this year are Pelwatte/Sevanagala Sugar Industries Ltd., minority shares of Thalawakelle Plantations Ltd., and Malwatte Valley Plantations.

Q; Is there private sector commitment to invest in vital sectors?

A: Already, the private sector has shown their commitment in investment in infrastructure activities such as telecom, power, port, etc. The investments in the past were considered to be done only by the government.

Q: What is your strategy to mitigate the negative effects of privatisation on employment?

A: Negative effect in employment has been minimal subsequent to privatisation. With the increase in efficient utilisation of capital and labour and quality management and technology, employment opportunities should improve.

Q: What role does PERC play to protect workers and minimise political opposition to privatisation?

A: The Public Enterprises Reform Commission enters into proper agreements to safeguard the interests of the workers in the sale and  purchase agreement. Trade unions and employees are appraised and when necessary strengthening employee interests with collective agreements and voluntary retirement schemes, to take care of the employee's interests.

Q: Do the reforms permit the displacement of employees other than on a voluntary basis?

A: Reforms in any way do not displace the employee. New business visions introduced by the private sector along with efficiency and productivity, would not only create more employment, but would also lead to value addition in skills and create more opportunities for the employees.

Q: What are the pre-conditions for a successful privatisation programme?

A: Economic and political situation should be stable. Interest rates and inflation should be minimal. Labour laws should be investor friendly.

Q: As a final question, has privatisation worked in Sri Lanka?

A: Since 1987, about 80 entities have been privatised. Except selected few privatisations such as Hingurana, Kantale, Lanka Loha, Veyangoda and Pugoda Textiles, all other transactions have been successful.




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