President Premadasa’s dynamic policies in economic development and poverty alleviation
Friday, 1 May 2015 00:00
As one who had the opportunity to serve President Premadasa as the Chairman and Director General of the Greater Colombo Economic Commission and also as the first Chairman of the Board of Investment of Sri Lanka from ’91 to ’93 and prior to that as the Chairman of People’s Bank, it will be appropriate for me to write about the economic developments undertaken during this period especially connected to poverty alleviation or in today’s terms ‘inclusive development’ on the 22nd death anniversary of President Premadasa.
The 22nd death anniversary of late President R. Premadasa falls today, 1 May. It is sad that the country lost a dynamic leader who was action and result-oriented and had the vision to spread the development of the economy throughout the country by taking the industries to the villages and providing jobs to rural youth, which resulted in the upliftment of poverty in the rural sector.
As Chairman of People’s Bank during the period of President Premadasa, I was closely associated in the implementation of pro-poor programs such as direct lending to self-employed and small-scale projects through People’s Bank and its network of branches spread throughout the country.
The new concept of President Premadasa for the banks was to set up Praja Naya Niyamakas (PNN) who were given a loan of Rs. 100,000 by the bank on provision of security to on lend small amounts of loans ranging from Rs. 500 to Rs. 10,000 per person or for micro projects. Further, the rates of interest charged by the PNN and the on lending rate was recommended by the bank to enable the people to get loans at a very much reduced rates compared to the money lenders
Two of the major programs launched in which I was able to make a contribution were the Janasaviya or the poverty alleviation program when I was Chairman of People’s Bank and the 200 garment factories program as the Chairman and Director General of the BOI, both of which had a direct impact on the upliftment of the rural economy.
Both these programs made a significant contribution to the economic emancipation of the rural people which comprised 70% of the population of this country.
President Premadasa was one who had feeling for the common man and reached out to uplift their living conditions in many of the programs, such as the housing development projects, supply of drinking water and electricity and annual Gam Udawa celebrations which culminated in the many development projects completed in the area.
Although giving free handouts was the order of the day, President Premadasa was able to change this concept by pushing economic development to the provinces by inviting the private sector businessmen to set up garment factories in the rural areas.
Preference was given to Janasaviya certificate holders in the granting of jobs and this enabled the people to earn a wage rather than depend on free handouts. He was also able to activate the State banking sector to play a lead role in the Janasaviya poverty alleviation program.
This was one of the thrust projects of the Government and was handled by a separate ministry. However, the two State banks – People’s Bank and Bank of Ceylon – were called upon to play a major role in these two schemes.
In fact, I remember that when the late President was the Prime Minister, he summoned me and Dr. Nimal Sandaratne, the Chairman of the Bank of Ceylon, to a meeting at the Sucharitha and wanted us to come up with a proposal to set up agency banks in the AGA divisions to provide small sector loans at the doorstep of the villager. This meant that villagers would not have to come to banks and fill lengthy forms but could use the agency banks to obtain their loans without going through the normal lengthy procedure applicable to the grant of loans.
These agency banks were named Praja Naya Niyamaka (PNN). The banks were to identify persons to be appointed as agents of PNN who could undertake the task of lending money to the people of the area. They had to provide security for the money advanced by the banks at normal interest rates and they were to on lend at rates of 3 to 4% per month which rate was very much lower than the rates charged by money lenders which was 5 to 6% per month. The maximum money advanced to the PNN was between Rs. 50,000 to 100,000.
The Janasaviya scheme was implemented by both banks and was accelerated after the late President assumed office after winning the presidential elections. The People’s Bank had appointed 4,000 PNNs and the Bank of Ceylon a similar number.
The PNN scheme provided the opportunity for the rural masses another channel to obtain small sector loans. The private sector banks like the Sampath Bank also came up with a scheme for such small sector loans in certain selected areas and this was a scheme launched by late N.U. Jayawardena who was then the Chairman of Sampath Bank.
Due to the thrust on rural development and small sector loans, both the State banks came forward with various loan schemes between Rs. 5,000 and 25,000 without providing any security.
People’s Bank, which was set up mainly for the rural sector, at the inception was able to play a lead role in the setting up over 4,000 PNNs, grant of loans without security, self-employment loans to youth, agricultural loans, start-up loans, tiny sector loans, athamaru loans, pawning, Janasaviya loans, assisting the cooperatives and the cooperative rural banks.
The competition between the two banks also resulted in the rural sector benefiting and areas hitherto not visited by banks were targeted for the grant of loans. However, People’s Bank was able to overtake the Bank of Ceylon in the grant of loans in rural areas.
The policies of the late President resulted in a change of attitudes of the staff of banks to go to the small man who was earlier neglected and meet their requirements rather than wait for the people to come to the banks and queue up and fill forms.
Generally, many promises are made by politicians with no implementation and later forgotten. However, President Premadasa made it a point to monitor and evaluate performances of banks, ministries, departments and officials not only by verifying statistics but by sending his staff to visit the sites and give him a report after inspection.
This enabled him to find out which officials worked tirelessly to achieve results as well as those who bluffed him and enabled him to have an effective monitoring and control mechanism and also to take early remedial action.
200 garment factory program
I was Chairman of People’s Bank and one evening I had a call from the Secretary, R. Paskaralingam, who told me that the President wanted me to take over the GCEC, now BOI. This was quite a surprise and a challenge for me as I knew that the GCEC was quite different from People’s Bank, having over 350 branches and over 10,000 employees with a good cadre of seniors in the management staff who were the best products turned out by our local universities.
However, I had always accepted challenges and entered another new organisation which had a major role in attracting Foreign Direct Investment, increasing exports and in overall the economy of the country.
There were many new changes taking place at the GCEC at this time. Some of the major ones were the setting up of the Koggala Export Processing Zone, the 200 garment factories program, conversion of GCEC to BOI, for the first time incentives for the infrastructure projects were brought in compared to the earlier concept of only export-oriented projects, setting up of the one-stop-shop, Cabinet Sub Committee on Investments, and BOI projects became the main export earner for Sri Lanka.
The 200 garment factories program could be considered as one of the main achievements and contributions made by President Premadasa to uplift the rural economy of Sri Lanka with the help and support of the big companies in the private sector. For the first time we saw factories shifting out of the Katunayake and Biyagama Free Trade Zones in the Colombo and Gampaha Districts to outside provinces.
The US garment quotas were utilised by President Premadasa as a strategic tool for developing the rural economy and to help alleviate poverty in Sri Lanka and was far more effective than the billions of rupees spent by the international lending agencies to implement their trickle-down approach through massive projects, the benefits of which hardly reached the poor man.
The garment industry became the largest industrial export from Sri Lanka due to the vision of the late President. Workers who had to leave their villages and come to Colombo and Katunayake and stay in boarding houses with measly savings were now able to travel to work from their homes and have a substantial take home pay.
In fact, governments which criticised the 200 garment factories program when in the Opposition, once in power commenced the 50 garment factories program and other schemes but were not successful to the same extent as they did not have the same implementation capabilities as President Premadasa.
The private sector was drawn into the 200 garment factories program by giving tax incentives, infrastructure such as land, electricity, telephone, water, roadways and other benefits, quotas depending on the area selected to enable them to undertake expansions or new projects without much hassle and free of bureaucracy. This was the era where the one stop shop concept for the approval and implementation of projects was carried out by the BOI. All approvals were done under one roof, the BOI.
To undertake this project the late President selected the then Greater Colombo Economic Commission (GCEC) and converted it to the Board of Investment of Sri Lanka (BOI) in order that it would cover the entire country. This was a swift and significant change made within a few days and the Bill was approved by Parliament.
The BOI was used as the vehicle to achieve this massive task of setting up 200 garment factories, which indeed was a dream come true due to the dynamic leadership provided by President Premadasa.
Since the BOI was directly under the President, we found that we did not have any political interference and could work to achieve targets and goals according to set rules and regulations. In fact in 1977 President J.R. Jayewardene heralded the Open Economic Policy. The Greater Colombo Economic Commission was set up to attract Foreign Direct Investment, set up Free Trade Zones and promote export-oriented projects.
The GCEC/BOI was a very powerful organisation coming directly under the President and had the power of giving tax incentives, approval to open a foreign currency banking account and Customs functions for the imports and exports relating to GCEC/BOI companies. The first zone was set up in Katunayake and the second in Biyagama and they could be considered two of the very successful free trade zones in the world. President Premadasa set up the Koggala Free Trade Zone.
The success of the 200 garment factories program was the grant of tax incentives, textile quotas and luxury vehicles which was carried out under BOI as per the applicable rules and regulations without any political interference. In fact President Premadasa did not tolerate any political interference and we hardly ran into problems with any of the politicians. The staff of the BOI and others who were seconded from various ministries played a major role in making the 200 garment factories program a success. This indeed showed that given the right direction and authority, the public sector management could play a major role in the economic development of our country.
In fact the BOI was a one-stop-shop where investors could come to one place for all their requirements. The numerous meetings that we had with investors, Government ministries and banks chaired by the late President himself and others chaired by the Finance Secretary were action-oriented to solve problems of investors and not talk shops.
This was the difference with President Premadasa and his secretary Paskaralingam and other staff who were men of action and always result-oriented. The private sector and foreign investors really appreciated such speedy action and was not pushed from pillar to post but were served from one centre. President Premadasa wanted men who could perform and those with the ‘can do’ approach and did not worry whether they were red, blue or green.
I remember the frequent meetings we had at Sucharitha where President Premadasa invited investors who were due to open their factories and solved any problems they had. Always at these meetings the Chairman of CEB, Roadways and Water Board were present as the three items investors complained about were electricity supply, roadway and water supply.
The weekly meetings with the Cabinet Sub Committee was another vehicle which sorted out matters, especially relating to transfer of land for BOI projects, and many Cabinet papers were submitted for approval on the recommendation of the Cabinet Sub Committee.
The twin objectives of the trickle-down benefits of the benefits of large loans given for projects impacting grass root levels and alleviation of poverty were achieved directly by the implementation of the 200 garment factory program.
In fact, there were a minimum of 500 employed in each factory in an electorate and had a money circulation among the workers per month of Rs. 2 to Rs. 5 million. In addition all factories had to give the breakfast to the workers.
The target was 200 factories employing 100,000 youth and putting into the economy Rs. 500 million to Rs. 1 billion per month. The youth in the villages were for the first time producing export quality garments going to the main markets of USA and UK.
Credit should also be given to the USA Government, as the late President was able to utilise the garment quotas given to uplift the rural economy and move industrialisation from the city to the village. Increase in quotas was also obtained to sustain the expansion, which took place. Even factories were set up in the north in Vavuniya and in the east in Batticaloa.
The then USA Ambassador visited the opening of a garment factory in Puttalam with an OPIC investment delegation and they were highly impressed with what they saw. Thereafter, she also visited many other openings where USA investors had set up. We also had investors from UK, Hong Kong, Singapore and Germany investing in factories in the rural areas hitherto not even thought of by any industrialist, local or foreign.
In the 200 garment factory program the late President was present for all the official openings of factories and he gave opening dates to all investors and they had to work round the clock to open their factories on the scheduled dates. The opening of a factory was marked by the construction of a clock tower in all the areas which was undertaken by the investor and opened by the President before the factory opening.
At the initial stages it was slow but once started it was a hive of activity and industrialists were queuing up looking for sites to open factories. In fact the idea came from the late Kumar Dewapura who was the Chairman of the Tri Star Group. He was given a land in the Kurunegala District by the then Chief Minister Jayawickrema Perera and currently the Minister of Food to set up a garment factory and President Premadasa saw it and developed the idea of the 200 garment factories program. Kumar Dewapura was instrumental in setting up of the first few factories and giving a lead for others to join in the program.
At the time of his untimely death, 160 areas had been allocated to construct garment factories and 117 factories, all opened by the late president, six were ready for opening and 37 factories under construction.
Another special feature was that each town or village got a clock tower and this indicated that a garment factory had been opened in the area. Punctuality at the openings may be due to the clock towers that were constructed and on many occasions, President Premadasa was ahead of time to open the clock towers to avoid the rahu time.
There were many teams working to successfully carry out this gigantic task of setting up of the 200 garment factory program. Many teams from the BOI, UDA, Housing Ministry, CEB, RDA and Telecom were working and included the identifying of investors, areas and land for investment, granting of quota, incentives, infrastructure such as land, electricity, telephones, water, roadway etc., setting of target dates for opening of factories, supervision of building construction and reporting progress, assisting in the recruitment of the workers many of whom were from Janasaviya families, arrangements for the opening of the factory and construction of a clock tower in each area.
In addition, the late President also spoke to investors and we had to meet almost daily in the evening at the Sucharitha to review the progress in the presence of investors who had come to sort our problems. In all these instances they were sorted out on the spot or if the officers were not there, they were given instructions on the phone to attend to matters immediately.
Examples of some of the common matters were the supply of electricity, construction of roadways and provision of telephones, which were attended to immediately, with the President giving them the date for opening of the factory.
All these showed the excellent managerial skills, commitment and efficiency in which all departments worked to carry out this gigantic task with the outstanding leadership of President Premadasa.
Investors were able to speed up their import and export facilities by the setting up of the separate BOI Customs clearing centre. This mainly assisted the 200 garment factories set up outside the zones and immensely benefited investors by removing many bottlenecks. Therefore, it was really planning, implementing, monitoring and working round the clock that enabled these results to be achieved.
In 1991, apparel and garment exports were app. $ 43 m. With the setting up of the 200 garment factory program the exports increased tremendously and have today exceeded $ 4 billion. In fact many who criticised that the garment industry as a sunset industry can see for themselves the benefit it has given the country – the highest export earner and highest employer of females and meeting tough environmental and working conditions to meet global standards.
It was during the period of President Premadasa that for the first time incentives were given for infrastructure projects. The World Trade Centre (WTC) was one of the significant investments that took place during this time, the Exhibition and Convention Centre in Fort, and many other hospitals, housing, TV, radio, mobile phones and hotel projects.
a. World Trade Centre
This was the first major infrastructure project undertaken by a Singaporean Investor S.P. Tao that was commenced and approved under the BOI incentive scheme. This was going to be a 39-storey twin tower costing app. $ 130 m and the biggest project undertaken at that time.
The ceremonial construction commenced with the presence of Tao and myself as Chairman of BOI and with Ven. Podi Hamuduruwo chanting seth pirith. The BOI was able to act as a one-stop-shop and provide the necessary facilities to the investor to undertake this massive project.
One of the key people who convinced and later helped in expediting the project was Paskaralingam, the Secretary Finance at that time. Tao was also a good friend of the late Baku Mahadeva, a former Secretary of Finance. This shows the role played by the BOI in its true form in the economic development of the country led by the president Premadasa.
b. Kandalama Hotel project
This hotel project was approved by the BOI and when construction was to begin, there were a lot of protests from politicians and villagers, mainly due to environmental hazards and pollution that would result from running a hotel in this area.
Late President Premadasa obtained expert opinion and found that there was no danger to the environment nor to the lake as a result of this project and carried out a campaign to inform the public of the benefits and advantages of this project to the people of the area and to overcome the fears of residents and people of the area.
These protests later turned out to be political, as in many cases. However, the Government never gave into these objections and protests and it was possible for the owners of the hotel to construct the hotel. The right decision of President Premadasa is testimony not only to the popularity of the hotel with both local and foreign tourists but also their winning many international awards for eco-tourism and environment friendliness.
Many who had vociferously campaigned against the construction of the hotel had been present at the official opening of the hotel. The tourist and hotel industry should pay tribute to the late Leader who fought for the rights of the tourist industry and made them internationally famous. In fact, the tourist industry was given many benefits such as tax incentives, duty free concessions and this applied to both new and existing hotels.
c. Other infrastructure projects
Some of the leading companies today in the mobile sector such as Dialog, Singapore Telecom, were approved under the new infrastructure incentives granted.
In the television industry some of the main channels such as MTV/Sirasa, Swarnavahini and TNL which were approved under different names were licenced during the period of President Premadasa under the BOI incentives. This included some radio stations.
Today the biggest investment is in the infrastructure sector and this includes the port development, telecommunication, power plants, hospitals, hotels and housing apartments.
Breaking the bureaucracy
Late President Premadasa for the first time was able to activate the Government servants who willingly and readily served the people, avoiding criticism from the public. The term bureaucracy was nowhere to be seen or heard during this period.
Some of the major events organised to take the Government machinery to the people were the Presidential mobile service, which took the ministries, ministers, secretaries and other officers to the provinces and provided immediate solutions to problems brought to them. Various ministries also conducted their own ministry mobile services in various provinces before the presidential mobile service.
This was also an era where the Government servants were working round the clock and were very effective. Many of them were awakened early in the morning by the late President at 4 a.m. if there were any adverse stories in the newspapers or to check on the progress of work he had given them. This also kept the Government servants on their toes and the Government machinery moving.
President Premadasa who never took “no” for an answer expected the Government servants as well as the private sector to have a ‘can do’ attitude. He was a person who firmly practiced the idiom ‘walk the talk’.
He carried out his plans and was involved in all stages of these projects and gave the leadership. He was not comfortable with people who were negative or always came up with excuses. There have been instances where Government servants had been transferred on the spot due to negative attitudes or not doing work allocated to them.
Lessons for the future
Today, with people in the north and the south having lot of expectations with the peace process, it is essential to implement development programs to accelerate economic development and alleviate poverty and usher in prosperity.
The ambitious programs of the Government could be easily achieved if they follow the policies of President Premadasa by providing leadership and being action and result-oriented. The leaders should follow President Premadasa’s policies to go to the villages and to see for themselves whether their needs are met and work for the upliftment of the rural poor.
President Premadasa played a gigantic task of reawakening our economy and was one of the very few action-oriented presidents with the common man at heart. He was a leader who was able to activate the economy by utilising both the public and private sector and accelerate development. Today’s leaders should make use of the Premadasa policies to give a jump-start to our economy and make our people more industrious and prosperous.
President Premadasa made use of the Free Trade Policies and the GCEC/BOI set up by President Jayewardene for the economic development of the entire country and give the benefits to the rural people. It is imperative that the BOI should be brought to the place it was during the period of President Jayewardene and President Premadasa. Successes achieved during this period should open the eyes of the present day rulers to the vision of President Jayewardene and the implementation policies of President Premadasa using the BOI.
Many have stated that had the era of President Premadasa continued, it would have led Sri Lanka to a disciplined and industrious nation similar to Singapore which was rebuilt by another great leader, the former Prime Minister of Singapore Late Lee Kuan Yew.
(The writer is former Chairman and Director General Board of Investment of Sri Lanka, former Chairman People’s Bank, former Chairman and Managing Director State Mining and Mineral Development Corporation, and former Chairman and Managing Director and Ceylon Leather Product Corporation.)