By Chanaka Bandarage –
Majority of the people in developing nations including Sri Lanka bore a socialist ideology (e.g. the Non Aligned Movement was closely affiliated with China and the USSR).
Thanks to Bandaranaike governments in the 50s to 70s, we have developed a resentment towards the West and a contentment towards the East. Sometimes this has been to our disadvantage. When China offered the Port City, we gladly accepted it. But, we firmly refused the MCC offer. After the US transferred the grant of US$480 to another 3rd world country, we started to lament.
Due to the country’s predominant leftist/socialist thinking, there is a wrong perception that direct foreign investment (they mostly come from the West) is bad. Also, that the West, especially the US, is all out to conquer us.
All countries need foreign investment for development. This means foreign companies investing in Sri Lanka of their capital. The assets include valuable foreign currency – US Dollars, Sterling Pounds, Japanese Yen, Chinese Yuan, Indian Rupees, and Malaysian Ringgit etc.
We need foreign currency even to buy our basic essentials like wheat, sugar, oil, gas, fertilizers and medicine. It is foolish to think we can generate all our foreign money requirements through tourism (currently almost dead) and remittances by our overseas workers. Our export revenue is insufficient even to pay off the foreign debts (currently in excess of US$ 50 Billion).
Unfortunately, there is a tremendous opposition in the country to direct foreign investments. Leftist/socialist elements make a huge cry that if foreign (western) companies are allowed to come, they will destroy the country.
We are a tiny island, we cannot rise on our own. We must closely interact with rest of the world. If we are going to reject everything simply because they come from the West, we will never prosper. We should not allow a small element of radicals and hooligans to take the country to ransom (the writer is not in total disfavour of industrial action/public protest; sometimes they are needed to obtain redress from harsh, cruel and dangerous governments). Some want us to live like frogs in a well.
The writer stresses that Foreign Investment is good and much needed. It must be properly regulated/monitored. They boost economic growth, open up new markets, introduce new technology/know how, create local jobs, provide sophisticated training to employees and promote industry competitiveness.
The government’s role is to assist foreign companies to buy/lease land to set up their offices/factories here and monitor their activities by enacting laws.
In 1940s to 50s Sri Lanka was successful in attracting abundance of foreign investment. Until 1956 or so we were the 2nd best economy of Asia after Japan.
A large number of foreign companies invested valuable capital and established branches/joint ventures here. Some of them exist to this day (some left due to governments’ bad policies such as nationalization, unpredictable behaviour, revenge taking, corruption, civil unrest, economic downturn, labour strikes, too many public holidays etc).
Some of Sri Lanka’s success stories are: Uni Lever, John Keels, Ceylon Tobacco, Hayles, Aitken Spence, Standard Chartered, Walkers, Cargills, Whittal Boustead, Glaxo, EB Creasy, Maurice Roach, Lipton, Brooke Bond, HSBC, Ford Rhodes, Browns, Millers, Apothecaries, Raleighs, Pfizer, Mackinnon Mackenzie, KPMG, Carson Cumberbatch, Colombo Commercial, CV Bhatt, Mackwoods, Ernst & Young, Tata, Freudenberg, Rowlands, Pure Beverages, McLarens, Nestle, Ceylon Cold Stores, Grindlays, Walker & Grieg, Baurs, Hunters, JL Morrison Son & Jones, Colettes, Bartleets and Muller & Phipps.
In 1977, the government established the Board of Investment of Sri Lanka (BOI) under the Chairmanship of Upali Wijewardane. It was successful in establishing South Asia’s first Free Trade Zone (Katunayake). Successive governments established new FTZs, mainly to attract foreign investors in the garment industry.
In Sri Lanka, even leftist parties who oppose the concept of foreign investment say we need a Lee Kwan Yew or Mahathir Mohamed to develop Sri Lanka. They have forgotten that those two gentlemen developed their countries by securing foreign investment. Today, the world’s 5 top foreign investment receiving nations are (in that order): Singapore, China, Hong Kong, Japan and Malaysia.
Though China is ruled by the Communist Party; it is not incorrect to say that China is today ‘world’s capitalism factory’. China has more BMW, Rolls Royce, Mercedes Benz, Audi, Lexus and Porsche vehicles than any other country.
After the World War 2, Germany and Japan rose from the ashes thanks to foreign investment. South Korea was built by the USA after the Korean War in 1953. Taiwan was helped by the USA, and Hong Kong by the UK. Malaysia is one of the world’s largest computer chip manufacturers. Microsoft, IBM, Apple, Google, Amazon, Ebay, Facebook and many leading companies have branches there. Why cannot we have those branches here? (when Google wanted to establish a branch in Sri Lanka the leftists/socialists strenuously opposed it).
In 2003, an international conference held in Tokyo (IMF) pledged Sri Lanka US$4.5 billion if the war was permanently ceased. After the 2009 victory, we failed to seek that amount (it was a grant). Instead, we went on to borrow money from China at high interest rates to rebuild the North and East (Uthuru Wasanthaya and Nagenahira Udanaya), Southern and Katunayake Expressways, Hambanthotha Port, Mattala Airport, Nelum Pokuna, Nelum Kuluna etc.
In recent years we had an inflow of foreign exchange by way of the establishment of foreign food chains: McDonalds, KFC, Pizza Hut, Taco Bell, Dominos, Hungry Jacks, and Subway etc. The writer acknowledges fast food are loaded with calories, sodium and unhealthy fat; he stresses people should avoid eating them frequently. But, they are healthy to our GDP and generate lots of job opportunities. A noted thing is that those who criticise foreign investment can be seen patronizing these eateries.
Overall, foreign investment is the key for any developing country. Some of its drawbacks are: adverse effect on local industries, cultural erosion, and possibility of inflating the economy.
Privatization is the process by which a property or business is transferred from being owned by the government to a private company. This could be a freehold or lease transfer. The basic objective is to increase efficacy and reduce the size of the public sector (Sri Lanka recently absorbed 60,000 graduates to government positions indicating it believes in maintaining a very large public service – one of the largest in Asia. This is a recipe for economic failure).
By obtaining funds through Privatization, the government is able to pay off debts. In some countries it has boosted the stock market.
In Sri Lanka privatization has been a total disaster. It was introduced by JR Jayewardene’s (JRJ) 1977 government: Ceylon Ceramics, Ceylon Leather Products, Sugar Corporation, National Textile Corporation, Ceylon Plywood, sale of state land to private companies (Pelwatte Sugar in Bibile/Moneragala, to MPs at very low price etc). Introduction of private bus operators was the reason for the downfall of the CTB.
Before JRJ’s privatization, Mrs Sirima Bandaranaike carried out a disastrous nationalization policy. She nationalized many private companies: Shell, BCC, United Motors, Lake House, Manufacturers and Merchants, Wellawatte Spinning & Weaving Mills, private schools (there are more private/international schools now than those days), Tea, Rubber and Coconut estates (they are back in the private hands now), and even a small Maradana eatery – Buhari. (Between 1956 – 1959, SWRD Bandaranaike nationalized the Colombo Port and private Bus Companies).
In recent times we sold state assets to local and overseas private companies. Almost all of the ventures were failures. Most of those transactions were dubious – they involved millions of amounts in bribery and corruption. National assets built over so many decades were sold/leased to few capitalist friends/acquaintances of the country’s rulers/politicians/elite: Air Lanka to Emirates, CPC to IOC, Ceylon Steel, State Hardware, Salt Corporation, thousands of state land to local and foreign companies (transfer to Dole to grow fruits), cleared thousands of acres of forests – for logging, build hotels/private holiday villas, a proposal to grow Aloe Vera – Komarika in Raja Rata etc, sale/lease of Colombo Port terminals to P&O/John Keels, China Harbour and Adani, lease of Hambanthotha Port to China for 99 years, sale of EAP Group (which was placed under a State Liquidator) to Lyca Mobile Group (why were not the funds raised (US$75) utilised to pay the disgruntled ETI depositors?), sale of Galle Face land (Army Headquarters) to Shangri-La for $50 million (worthed around $2 Billion in 2014?), sale of Kerawalapitiya (40%) to USA firm, New Fortress Energy, for US$250 (worth around US$1 Billion?). There is a current proposal to hand valuable Colombo lands to China through Selendiva. These sales could also go for paltry amounts. Details are unclear.
What the government would do with the old Manning Market land is something all must watch. Let us hope this very valuable property will also not end up in the Chinese hands. If it must go to China (to raise $), the government must lease it (maximum of 99 years) for a value exceeding US$ 4 Billion.
Privatization of government ventures is an outdated concept, started by Margret Thatcher in the early 80s. It was never successful in Sri Lanka. It will not be successful today.
*The writer has been a Barrister in Australia