Private Sector
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23 May 2010 
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Sunday Leader
2010-05-23 00:29:10
By Paneetha Ameresekere – Business Editor
Last week these pages quoted Cargills Ceylon Plc c.e.o. Ranjit Page, exhorting the private sector to make that difference to the economy, now that the war has been won.
In a thought provoking statement, Page said that a year ago they thought that the war could not be won, but a year after the war win there is no difference. He therefore said that it was upto the private sector to make that difference in a socio economic sense, by creating islandwide employment opportunities.
Page laid no onus on the Government to make that difference, his exhortation was directed to the private sector only.
His was the Cargills example, where that supermarket operator has directly linked with the farmer to supply produce to its retail outlets, thereby bypassing the wholesale market and the middleman, with the former being touted by his peers as the way to go, despite which he decided to do the contrary in 1999.
Cargills is one of Sri Lanka’s largest modern retail outlets, which, according to Page, is represented in 23 of the country’s 25 districts. The company has linked up with 10,000 farmers in this operation.
Cargills is seemingly a company that did not ask for doles or handouts when rolling out this business model, which Page termed as sustainable to the farmer, and though not said, obviously to his company, which previously was a niche market player, but has since transformed itself to be a seemingly successful mass market player.
Whether the success of a services company such as Cargills, catering to the domestic market, could likewise be replicated smoothly by other private sector players in the economy, is a matter for conjecture.
For example, exporters who have qualified to sell their products on a duty free basis to the E.U. region under the g.s.p. + facility need the Government’s help to ensure that this concession is not lost because of Colombo’s alleged human rights violations in their prosecution of the war against the L.T.T.E. in its final stages, a charge made by the E.U., as the reason for not wanting to extend the concession.
Colombo has been given time till August to make its plea. The success or failure in regard to the future of g.s.p.+ is solely in the Government’s court. There is nothing that the private sector could do, even if it puts its best foot forward.
Similarly in the case of infrastructure development, the private sector, if it’s to play a lead role in this regard, will need the Government to create that enabling environment in the form of having the necessary legislation in place, whether it be land acquisition or investor friendly labour laws or tollways, in respect of road projects, so that the investor would be able to recover his monies, thereby incentivizing the private sector to participate in such projects.
“One size fit all” is not seemingly apt.
The Government carrying a debt burden of 86% of g.d.p. and a budget deficit of 9.7% may not have the fiscal space to carry out such works by its own steam. It may however try to tap China, as it has already done, by borrowing from them on commercial rates to make such things happen, but that would further aggravate the island’s debt burden, a picture that is not conducive to attract investments.
Besides, going from past experience, if the Government only targets Chinese assistance, there is no guarantee that they would employ local labour on such projects, thereby denying the citizens of this country and the country’s economy immediate benefits from such development schemes.
Contrast this with the Accelerated Mahaweli Development project of 1977. Not only was the Government of the day able to clinch soft loans, if not grants for such works, it was also ensured that it was local labour that was employed in such schemes and not foreign-unless the subject in question was technical, to which there was no competent labour available locally.
Therefore there are things that the private sector can do independent of the Government, and in the same vein, there are those things to which it requires support from the Government to get things moving.
The question as to whether the private sector is working at its optimum is another matter. But such adverbs mean nothing because one may argue that it will be difficult for the private sector to justify to its shareholders of resources expended, on a project, in the event there are bottlenecks, to which only a mandate by the Government, could have those removed, and if such a mandate is not forthcoming, after having had already started on such a scheme.
Therefore it’s of paramount importance that the Government acts as a facilitator to the private sector, to enable the economy to move forward and create jobs for the youth of this country, a role which it has been playing in a big way since 1977.
The Government needs to act now, tomorrow may be too late.
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