Slow progress for Jaffna businesses

Tuesday, 31 May 2011 00:51 - - {{hitsCtrl.values.hits}}

Industrialists in Jaffna are still struggling with finance issues says a top business expert from the formerly war torn region.

Despite the war ending almost two years ago Chamber of Commerce and Industry of Yarlpanam (CCIY) President K. Poornachandran admitted that the progress in the region has been very slow. Lack of financial assistance and investment were highlighted by him as the main issues. He made these statements at an event to sign a Memorandum of Understanding (MoU) with the American Chamber of Commerce in Sri Lanka (AMCHAM).

“Before the war we had over 1300 companies and now that has dwindled to about 100. Industrialists have no money and raising capital is an uphill task. Even though there are 125 bank branches their collateral demands are high. In addition, our industrialists cannot pay 12%-13% interest rates,” he said.

He added that even though the Central Bank has introduced finance schemes they have not been successful on a large scale.

“When we went to meet the Central Bank Governor he said that certain elements such as machines can be used as collateral but when we go to the banks they say that is not so. Many of the business were destroyed many times over and whatever savings the companies had were spent to repair them.”

He explained the high levels of savings enjoyed by banks that have opened up in the north and east by pointing out that the natural tendency of the Tamil population to save made high returns for banks. “Domestic savings and profits from traders are the money that is being seen by banks. There is nothing from industrialists.”

Most of the development in the area is from government sponsored infrastructure projects and little has been funnelled into developing businesses Poornachandran noted. “The infrastructure projects will be completed by around September; so we have decided to wait till then. Hopefully investment will increase once the infrastructure is in place.”

The MoU between AMCHAM and CCIY is expected to developing trade and investment with small and medium businesses. The MoU aims to promote business between AMCHAM members and CCIY member companies and thereby foster regional linkages. It also ensures mutual assistance in concluding bi-lateral joint investment and agreements with the US and joint participation at trade and investment related initiatives in the US.

“Many US businesses have expressed their interest to do business in Jaffna to AMCHAM. We are very confident of the business environment in Sri Lanka and hope to coordinate with CCIY to promote business in Jaffna,” said AMCHAM President Viyaja Ratnayake.