SMEs a vital cog in economy and need a kick start

Following are excerpts from the speech by Sri Lanka Chamber of Small and medium Industries President Alloy Jayawardene at its 47th anniversary celebrations and ‘Industrial Excellence Awards 2010” ceremony held early this week.

Before I commence my address, let us rise and observe a moment of silence remembering our founder members of the Chamber, those honourable men who dedicated themselves to the course of Sri Lanka Small Industry 47 years ago and are no longer with us. I make special remembrance of late Francis Wanigasekere who passed away recently. He was Honorary General Secretary at the inception and the third President 1970-1971 of the All Ceylon Small Industrialists Association. He was 97 years old at the time of his demise.

Honourable Rishad Bathiudeen, Member of Parliament, Minister of Industry and  Commerce, Ms. Patricia Yoon- Moi Chia, Secretary-General, The Colombo Plan Secretariat, Her Excellency Mrs. Nirsa Castro Guevara, Ambassador for Cuba in Sri Lanka, Honorable John Amaratunge, Opposition Chief Whip in Parliament, Ministry Secretaries, Heads of Statutory Boards, Ministry Officials, visiting industrialists from North and East, my Brother Members of the Chamber and friends. I feel both privileged and sad, because I happened to be the only one left, holding membership of the Chamber of that band of dedicated friends who founded this Chamber 47 years ago. The last 47 years have seen our Chamber grow from a Small Industry Association to its present status in our land.

Today we are no longer an Association. We are now known as the Sri Lanka Chamber of Small and Medium Industries, Incorporated by an Act of Parliament. We extend our sincere and grateful thanks to Honourable Minister of Industry and Commerce, Secretary-General of The Colombo Plan Secretariat, Her Excellency the Ambassador for Cuba and my friend John Amaratunge for being with us this evening.

“The Industrial Excellence Award” which we initially opened to our membership, last year we opened up to all Small and Medium Industrialists of this Country and this year 2010 we invited our Brother Industrialists from the North and the East, just over one year after the dawn of peace in Sri Lanka following the eradication of terrorism from our land. We are extremely thankful to Mr. V. Sivagnanasothy, Secretary, Ministry of Traditional Industries and Small Enterprise Development for the support extended to have a number of Industrialists from the North and East taking part to win an Elegant Trophy and a cash prize of Rs. 25,000. From the other parts of the Country along with our membership we recognise 10 Manufacturing Units for their excellence with a Platinum Award which carries an elegant trophy and a cash prize of Rs. 50,000.

To our panel of Judges for the Industrial Excellence Award (2010). Our sincere thanks to Professor Kapila Jayasinghe of the University of Moratuwa who chaired the Panel of Judges for the second year and others on the Panel representing The Ministry of Industry and Commerce, Board of Investment, Export Development Board and my dear friend Lalith Kahatapitiya representing the Chamber.

We have with us this evening Dr. Dagma Lumm – Senior Advisor, of the German Techincal Co-operation (GTZ), the bilateral development co-operation between Sri Lanka and Germany has existed for over 40 years.

The ongoing economic downturn have pushed the Small and Medium Sector of Industry into its worst period, similar to what it was in late ’70s and early ’80s, the time the open economy was introduced. We need the Government to protect the Small and Medium Sector during these difficult times. The Small and Medium Sector has taken a heavy beating since 2007. The main reason was the adverse impact on the global downturn. I as President of the Chamber of Small and Medium Industries was invited as the only Chamber President to address the Monetary Policy Consultative Committee of the Central Bank early this year to express the Chamber views on the Small and Medium Industrial Sector. This Committee was chaired by Professor A.D.V. de S. Indraratne with high powered private sector business leaders in the Committee. The Banks were represented by the President of the Bankers’ Association, Rajendra Theagarajah, Chief Executive Officer of Hatton National Bank. Problems related to finance were identified as the foremost affecting the Small and Medium Industry today. Our main problem is with banks. Everyone in the Small and Medium Sector has mortgaged all assets to the banks and are unable to get even a loan for working capital as no bank is willing to extend credit if they cannot offer collateral. For our survival we requested Government to suspend the labour laws and allow layoffs, to freeze bank loans and accumulated interest and taxes for a period of two years to overcome the global meltdown which had impacted Sri Lanka’s Industry since 2007. The Government should understand that the Small and Medium Enterprises is a vital cog in our country’s economy and that we represent 70% of the Gross Domestic Product and a kick start should be given to the Small and Medium Sector if the economy is to develop.

This presentation was given much publicity in the print media as one said I quote” It is heartening that at least one private sector chamber leader has had the guts to tell the truth not minding whether it is better or not for Government.” Unquote.

After having placed our proposals to the said committee, the Governor of the Central Bank called us for a meeting. At this meeting he gave us the assurance that the forthcoming Budget for 2011 will give much benefits to the SME Sector. We are hopeful that this would be a reality bringing the much belated relief to the SME Sector.

We were elevated when the President of the Bankers Association Rajendra Theagarajah speaking at a forum a few weeks ago said that the Banks should be less tight fisted and lend More to the Small and Medium Entrepreneurs. The end of the Islands 30 year ethnic war has opened up new opportunities that should accelerate growth. Building confidence in us is very important. The banking sector should drive the economic growth in the immediate future. The banks should unclench their fists to support the national dream for faster economic growth.

There is a huge need for the banking sector to support the Small and Medium Entrepreneur as we hold 70% of the country’s economy. The Banks should move away from asset or security based lending to cash flow based lending.

Even Dr. P.B. Jayasundera has rapped the country’s banking sector for making things difficult for borrowers. As the Secretary to the Treasury has rightly pointed out I Quote: “In the post conflict context, our private sector deserves some relief from the banking sector. Today most enterprises which were shut down and performing below par due to security risks are witnessing a gradual renaissance. They should be given all the assistance by the banks to put them back on their feet. Rigid regulations in lending should be re-considered since this would discourage Small and Medium Sector Enterprises. The Private Sector as it is often said is the engine of growth” – Unquote.

The Ministry of Industrial Development during the latter part of 2009, appointed a committee to draft a Policy Strategy on Small and Medium Enterprise Development. It was surprising with one or two sittings, with the appointment of new Ministers, we presume this committee was suspended. We received a draft prepared by the former Secretary to the Ministry requesting our comments. The said draft contained most of the issues that were discussed and a white paper formulated in the year 2002, which was funded by “ADB” in which Committee I myself sat for discussions for more than 5 to 6 months.  This Committee was chaired by Dr. Saman Kelegama Executive Director, Institute of Policy Studies. This report was commissioned by the then Minister of Enterprise Development, Industrial Policy and Investment. This report never saw the light of the day other than two issues.  This ADB funded document of 2002 can be considered to be a comprehensive document dealing with SME Development Strategy. It recognises the vital role the SME Sector plays in Sri Lanka’s economy.

The White Paper has identified several issues and has proposed a series of measures to be undertaken by the Government and other relevant parties in order to address them. Only two issues of this document was taken up, the SME Authority and the Bank for SME. The Authority to be established was similar to The Board of Investment, a One Stop Shop. But with the implementation it did not happen. Although the National Enterprise Development Authority was established in place of the SME Authority it does not have the powers to serve the SME Sector in the proper way as expected. The SME Bank, presently known as The Lankaputhra Development Bank that was established for the SME Sector, the monies of the Bank was doled out to the larger sector of business and did not cater to the Small and Medium enterprises. Further, even the credit line given by ADB did not serve the SME but benefited the larger businesses. The other proposals in this document of 2002 was put into a shelf and thereafter forgotten. Our prayer to you the Honourable Minister, Sir, to resurrect this document of 2002 with the blessings of both His Excellency the President and Minister Basil Rajapakse and have the recommendations implemented which will be for the upliftment of the SME sector and the development of the economy of this country.

Madam Patricia Chia, we are thankful for your presence here with us this evening. Thank you for having made it possible for two of your officials to address the Chamber Executive Council a few weeks ago. We have noted that the programmes initiated for the Small and Medium Entrepreneur is doled out mostly to Government Officials as your “focal point” is a Government Ministry. In fact if I may recall in the late ’90s on the request made by the Chamber to the then Secretary General, the Chamber of Small Industry was made the “focal point”.

Madam, why not give our Chamber which covers most of the Small and Medium Sector of Industries the “focal point” which will benefit the private sector for its development.We welcome the fast growing unity among Tamil political parties. Let me recall the national minded sentiments expressed 30 years ago by the much hailed Communist Party Leader Pieter Keuneman who visited Jaffna immediately after the burning of the historic Jaffna Library. With eyes glued at the remnants of that historic building with tears rolling down his cheeks, this Communist Party Leader told the Tamil Leaders at that time to stand united as one community and one people to resurrect this building someday. As long as you are divided you will never find solutions to your grievances. On his return to Colombo Kueneman drove straight to the residence of the then President J. R. Jayewardene to brief him on the irreparable loss and damage caused to the knowledge of the Tamil population in the North by burning of the historic Library in South Asia. J. R. started his political career reading the Marxist Ideology before returning to a Democratic Capitalist. Kueneman told his friend J. R., Dicky, you can re-construct that building to its former glory, but you will never find those books that gave knowledge to us and our Tamil Leaders. Before bidding goodbye to his friend, with one foot in his car Kueneman said my wish to see our countrymen live without any torturing regrets. Though belated, Kueneman’s call which came 30 years ago, now seems to have been heard by our Tamil political Party Leaders. These leaders met President Mahinda Rajapaksa sometime back to discuss issues facing the Tamil Community. The LTTE is buried and they will not face any obstacles on their way. No democratically elected legitimate Government could offer nor find solutions to any aggrieved community, if that community stands divided. Therefore, having unity is paramount at this juncture to find any solution to meet the aspirations of the Tamil speaking people.

The inland basin of the Hambantota port is being flooded and the first ship is expected to reach the New Port quite soon. The development goals of this Government we may see within the next few years – Colombo/Matara Expressway, the Norochcholai Coal fired Power Plant, The Colombo Port expansion scheme, Katunayake/ Colombo Expressway and more.

President Rajapaksa faced upheavals of unprecedented magnitude during his first term as President, but he is now free from trouble and is in a position to concentrate on development in a big way during his second term which commences shortly. The road ahead of President Rajapaksa is clear as never before. It is now up to him to steer the country towards prosperity.

President Mahinda Rajapaksa’s triumphant Government has failed to make the country’s Tamil minority feel secure after crushing the Tiger insurgency last year. There is no denying the fact that the LTTE utilised the provisions of the CFA (Ceasefire Agreement) for the multi pronged terrorist war against Sri Lanka and we are even today paying the price for that folly despite the military offensive itself being over. The only way to head off the Diaspora International Campaign is by winning over the Tamil People with a credible constitutional proposal which would be acceptable to the Tamil People. If we can come up with such a proposal we would then get the support of the international community to end their campaign against our Country.

The distancing that has taken place between Sri Lanka and the Western Countries over the past several years is unfortunate. These countries continue to be Sri Lanka’s export markets and also gave a considerable amount of development assistance to the country in the past. At present Sri Lanka is receiving considerable economic assistance from China which makes up for the reduction in Western assistance. However, more assistance the country can obtain from developing partners the better it is for the people, if that aid is used for their benefit. Until recently Japan was Sri Lanka’s largest donor, and what it has given will be difficult for any other country to match. Special relationships like these that spanned the decades must not be lost. Despite the stresses of the present, these countries have been good friends too.

We are to introduce a series of activities aiming at assisting the SME sector commencing from the year 2011. These activities will be designed to benefit a number of businesses at national level. The activities will also be directed towards the informal businesses in order to get them into main stream economy.

The Chamber has assigned this task to Neil Magederagamge former Director General of Commerce. He is assigned with the task of mapping out an appropriate programme of action towards this purpose. At present Neil is conceptualising various ideas in order to transform them into a concrete work programme. It is imperative that we could be able to make an early assessment on the possible support that the Chamber could harness from donor agencies. In this regard, Honourable Minister, we need your support and that of Honourable Basil Rajapaksa Minister of Economic Development for the Chamber to set up a centre for the Development of Small and Medium Enterprises, with the assistance of donor agencies and Government, and to continue to maintain it under the leadership and administration of the Chamber.

Before I conclude may I extend my thanks to the members of the Executive Council of the Chamber for the support given to me to carry on my duties as President for the benefit of the membership.

Our Administrative Officer, Mr. Gerard Tisseverasinghe who takes a part of my burden in the activities of the Chamber should be commended for his co-operation.

Finally, my loving thanks to my better half, my extra-ordinary wife Delicia for all the encouragement extended to me to carry out my responsibilities toward the Chamber. If not for her support, my devotion to the Chamber may have fallen by the wayside. Everybody I know who has met her at some point comes up to me and says, you know Aloy, you’re great and all that. I like you. But your wife, she is really something; and I, of course agree.

Thank you friends for your patient hearing,

May God bless you all.