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by INDUNIL THENUWARA

The establishment of a bank for industries to develop the industrial sector through the provision of industrialists' capital needs and loans under concessionary terms was proposed by the Patron to the Small and Medium Industries Foundation Colombo District Rohan B. Fernando.

"Till such time, there should be a collateral insurance scheme which would facilitate industrialists to obtain loans from banks," he told a recent seminar on 'Strengthening the local economy by developing the Small and Medium Industries (SMI) sector', organised by the Foundation.

Lack of finances, market-related problems and management problems were identified by Fernando as issues that restrict the growth of SMIs.

"In countries such as Japan, Malaysia and Korea, SMIs were used heavily for development. However, in our country, this is different; we try to attract large, multinational companies through Board of Investment (BoI) concessions etc. Many of these companies have folded up their operations and left at the slightest hint of unrest.

This is not possible for SMIs, they have to keep going. That is why the local industry needs to be developed," he said.

He added that there has been no collapse in the SMI sector though some have predicted such a demise. "SMIs have felt a lot of shudders and many companies have closed down. However, this is not a total collapse."

Fernando said there is a lot we can learn from the open economy of India. India opened its market much later than us, but it does not dance to the World Bank tune.

"Dumping of cheaper goods has been taking place on a large scale to the detriment of local industries. What we are asking for is not protection, but a conducive environment which would help us to stand on our own feet.

"This will take some time, but cheap imports would have to be controlled in the meantime.

"The previous government imposed a 40 per cent surcharge on imports during the latter part of their regime. This was a commendable step and we hope the present government would continue this," he added.

In 2001, with the rupee depreciation and with electricity charges, raw material prices, wages and everything else going up, products had also gone up in price but profits for industrialists had tumbled.

Fernando called on the government to provide a credit guarantee scheme in association with the Central Bank so that banks would not be reluctant to lend to SMIs.

The other proposals made by the Foundation at the seminar were a national policy and plan on SMI development and the economic and social goals they hope to achieve; monthly meetings with ministers and officials so that problems faced by SMIs can be brought to their notice; setting up an organisation similar to the BoI to deal with coordination and administration issues of SMIs; setting up a technology bank which would fulfil industrialists' technology needs and getting assistance from universities and technical institutes for this venture; continuation of the present 40 per cent surcharge imposed on imports of finished goods and extending the duty concessions granted to raw material imports to machinery and equipment; taking measures to provide concessionary terms for electricity charges for registered local industries and abolishing the surcharge on electricity till such measures are taken; and granting income tax concessions to local industrialists.

Minister of Enterprise Development, Industrial Policy and Investment Promotion Prof. G.L. Peiris told the seminar that every country has its strengths which should be made use of.

"Sri Lanka is strong in its human resources and creativity is high among our youth. We can go a long way with skills development," he said.

"However, our SMIs are not very strong in marketing their products which has resulted in a huge difference between the producer's price and the final price due to the presence of too many intermediaries. We need a plan to rectify this situation and technology could also be used to a greater extent," the Minister said.

He said that no country in the world has all its doors open to the outside. "Not even the USA has a 100 per cent open economy, protection is offered to local industries in any country.

"There should be a proper balance," he said.

Prof. Peiris said that sectoral development, where the strengths of each sector could be taken into account, is necessary while they hope to integrate the economy of the North to the country's economy so that the vast resources in these areas can be utilised.

Minister of Rural Economy and Deputy Minister of Finance Bandula Gunawardana said that Sri Lanka has entered into many agreements with other parties without proper discussions. "We will be reconsidering all such areas," he said.

"A country cannot go forward if proper attention is not paid to the views of the public.

"SMIs play a large role in the economy and there is no doubt about their ability to prop up the economy. We will do everything we can to develop this sector," he said.

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