Sri Lanka should join supply chain of mega countries – Dr. Amunugama

By Uditha KUMARASINGHE

Senior Minister for International Monetary Co-operation Dr. Sarath Amunugama said it is important that Sri Lanka should join the supply chain of mega countries and showcase its products particularly in the manufacturing sector. This, however has to be done by being realistic and not nationalistic he said in an interview with the Sunday Observer. We have to join the mega supply chain by looking at our primary products.

The Minister said that in the modern world, we cannot have economic growth unless we invest in infrastructure. All countries in Asia that have come up and are experiencing double dight growth have invested in infrastructure. Otherwise, we will be like the Veddhas, pottering away in our own little garden. We have to build ports, harbours, airports, roads and bridges. All these modern facilities are being provided expeditiously so that there will be a take-off in the economy. Unless our ports are developed, we can’t run an import-export economy.

Dr. Amunugama categorically rejected the claims by the Opposition on militarisation saying there are over 150,000 war heroes who fought in the war against terrorism. They have to be paid their salaries and they have to be treated well. What does the UNP expect? Should these soldiers be just sent back to their villages, where they will then create mayhem? The Government will take responsibility to look after them. They will dedicate themselves to develop the country. We have the best people in the military. Our latest communication technology is handled by the Army and not by Universities.

The latest jets and pilots are with the Air force not in SriLankan Airlines. Our Navy is one of the best Navies in the world. We have trained and motivated people who have used their training to win the war against terrorists and safeguard the lives of the people. Now they are using those same skills to develop the country as well. What is wrong with that? Instead of talking about militarisation, the Opposition should stop being sloppy, disorganised, vicious and attacking one another. They need discipline. They are the people who need military discipline!

Q: Sri Lanka is poised to have a growth rate of well over eight percent this year. What are the steps being taken to continue this momentum?

A: Sri Lanka is having a growth rate of over eight percent for the last two years. It is very important that we sustain this momentum. Basically when we look at the economy in relation to agriculture, manufacturing and the service sector, we are doing extremely well in the agriculture sector with products from the North and the East as this has increased by leaps and bounds.

We are traditionally dependent on agriculture. The picture of serial production has gone up.

We are now moving from an economy that was self-sufficient to an export-oriented economy with rice being one of the items to be exported. When we got Independence, we had only eight million people. Even at that time, rice was imported from Myanmar, China and some other countries.

Now we have 20 million people. We can feed them and even export rice. I think it is a tribute to all the governments in this country. We are developing the agriculture sector and we can do more particularly on post-harvest aspects. We lose a bulk of rice, vegetables and various products due to post harvest losses.

We have asked for assistance from the World Bank to remedy this situation. This is a natural occurrence in most countries when production is increasing. Earlier we wanted to increase production but once we hit those targets, we have to improve the situation. Milling and storage are areas that have to be looked into . We must think of commercial agriculture.

In the case of tea, we are moving from bulk to manufacture value added tea. Our rival producers like Kenya are having problems. So overall I think, we should be able to hold steady next year.

Fortunately, we were not badly affected in manufacturing as most countries which had a broader manufacturing base because of the demand particularly from the US and Europe coming down. People are not spending on consumer goods in those countries. The demand for manufactured goods are coming down.

The textile sector, is doing well through niche marketing and better products. We can continue to have a growth of about 20 percent. I discussed with the Minister of Finance of China Xie Xuren recently. He pointed out that many of the light industries and other industries such as textile, toy making etc will be moving out of China. Earlier wages were so low in China that everybody rushed there because of the comparative advantage of the low cost of production. At present the wages of Chinese workers have gone up. Many of those industries will move out to countries which offer a lower wage.

The West is bringing various sanctions in an unofficial manner. So we will be able to capitalise on these. The Chinese Finance Minister also said 35 million jobs will move out of China into countries like the Philippines, Vietnam, Thailand and Sri Lanka. So we have to have a good strategy to expand our manufacturing base by making good use of the changes that are taking place in the Chinese economy.

We can make a dramatic improvement in the service sector as well.

Tourism is definitely going to improve. With global tourism, remittances coming in the IT sector is also increasing. We should be able to maintain the eight percent growth or even go up to nine percent.

Q: There is some turbulence in international financial markets, but our sovereign bonds have done well. What are the reasons for this?

A: Our sovereign bonds were oversubscribed seven times. We asked for $ one billion. We could have easily raised $ seven to $ ten billion at low interest rates. Normally when the economy is not doing well, we have to have higher interest rates to get the money coming for bonds. But when the economy is doing well, we can bring down the rate of interest. Here it was a historically low rate of interest.

In fact there was one American company that wanted to buy the whole bond issue of one billion.

Q: Forbes has said that Sri Lanka’s Rupee was perhaps the only currency in Asia that is swimming against the Asian currency depreciation tide. However, there are arguments that Sri Lanka should depreciate the rupee, which will also benefit exporters. What is your view?

A: This is a controversial issue. Exporters would naturally like to devalue the rupee because they would have more rupees for their Dollar earnings. But when we look at the economy, we have to look at every side.

One side is our debt repayments. When we are repaying at the rate of 110, then we don’t have to find so many rupees as it would be paying at 125 or thereabouts. So there is also a saving in debt repayments. The other point we have to remember is that if we devalue the rupee, the cost of imported item for the ordinary person such as potatoes, onions, sugar or oil will have to be imported at a higher rupee rate.

Then either the Government will have to subsidise more or they will have to pass it on to the consumer. So when we keep it at a certain level,we are also ensuring that there is less inflation and less hitting the pocket of the small man. After the budget, we will have to see if the economy is faring even better.

More employment is being generated locally and the people have more purchasing power. At the moment, we want to go on a narrow band of change. We should also remember this it is only against the Dollar. There has been considerable devaluation against the other currencies as well.

Q: The Colombo Stock Exchange has once again emerged as one of the best performing markets in Asia. What are the factors that led to this success?

A: When people feel that the economy is booming, then they want to get a piece of that action. As we know, there are a large number of pension funds and various financial institutions which invest with the idea of making a profit.

If we take a pension fund, investment fund, American, European or Indian fund, they are looking all over the world where they can invest the money and make a profit. They also want to see the value of their investment blow.

When there is an upswing in the economy, people confidently come and invest. When the economy is going down, they take their investment out.

That happened to us in the 2006 and 2007 period. Some of these investment funds took their money away. But when the economy is growing there is money coming into the country.

The second thing is that we are having a lot of retail purchases and people are getting used to the Stock Market. Basically the health of an economy is determined by the attitude of the Stock Market. Punters or investors see a likelihood of making money because the economy is improving. Then they invest.

Q: There was a report in Bloomberg on Wednesday that Sri Lanka and the Philippines are the only two countries in Asia that does consistently well in terms of gender equality on economic opportunity, education, politics, health and survival. What are the Government plans to further empower women economically?

A: Women are already economically empowered in Sri Lanka. If we look at all our major industries such as garments, tea and remittances from abroad, they are driven by women. Really in Sri Lanka, it is the men who have a good time. Most of them wearing red shirts are shouting on roads and going about, what work do they do? The real working class in Sri Lanka are the women. There are no large concentration of men in the working class, either they are clerical officers, postal workers or doctors.

They think they are the working class. But the real workers in Sri Lanka are the women in the garment, tea sector, remittances or even in the other areas. Even in the IT sector, 50 percent maybe women. It’s quite different in other countries. Because we have universal education. There is no gender inequality in schools and universities. In fact I think universities have more women than men.

Q: What kind of exposure is the Government expecting through Sri Lanka Expo to be held next year?

A: We have to showcase our products particularly in the manufacturing sector. If we look at China, one reason why they were able to move fast in the manufacturing sector was that all the ingredients were together so that anyone can place an order.

If we take their textile field, textiles, designs and buttons, are available at the show. So the investor takes all that.

We must showcase whatever we can. More fundamental and a very serious issue is advancing into the future. We have to look at our nearest country, India. India is going into mega manufacturing like motorcars, machinery etc. So Sri Lanka must get into the supply chain. If there is a large motor industry growing in Chennai, then we should link our rubber industries with that.

If there is growth in computer manufacturing, we should be use some of our own metals that can be produced in Pesalai and various other places.

There are so many minerals produced in Sri Lanka which can be used in the supply chain of major manufacturers. Some of these items are sent to countries like Japan, Korea and Thailand.

It is very important that Sri Lanka joins the supply chain of mega countries.

We have to realise that we must join the mega supply chain by looking at our primary products as a way of supplying. This can be done. We have not explored our minerals and we are not making full use of rubber and tea.

All these must transform as a part of the supply chain for mega manufacturing. In addition, if we also get gas and oil, our import commodities bill has to be contained. Then we can go even much faster.

Q: The potential for gas and oil reserves off the coast of Sri Lanka has been established. What kind of impact will this have on the economy in the long term?

A: What they say is that if you hit gas or oil, your dreams can come true. Of course we are very lucky in the sense that preliminary findings are very positive. But of course it must be put in perspective and a lot of hard work has to be done. We have to find out whether it is available in commercial quantities.

We will reap the benefits immediately. Take the case of Cairns, their shares are going up in the Indian market where they are registered. This shows how correct the Government was in this matter.

I saw some newspapers where the Opposition was saying why did we sell one block? We would have sold all together. Now we have sold only one block. So we can sell the other blocks at a much higher rate. This shows how idiotic these so-called economists in the Opposition are and what they say. They have no practical knowledge.

Q: With the dawn of peace a lot of development activities are taking place in the country in all spheres. What is your personal contribution and are you happy with it?

A: The Chinese started their growth by developing their ports in the Southern areas. Basically those are the cornerstones of economic growth.

Q: The Opposition is alleging that the Hambantota Port, Kerawalapitiya coal power plant and Maththala Airport as unproductive schemes where huge amounts of money have been spent without proper planning. What are your comments?

A: I want to say that these projects have been thoroughly vetted by the Sri Lanka Government and Governments giving money on loan to complete these projects. In the modern world, no bank however friendly they may be are going to give money if the project is not feasible.

Hambantota Port is an example. Finance Ministry Secretary Dr. P.B. Jayasundara, Sri Lanka Ports Authority Chairman Priyath Banduwickrama and myself were the three people who negotiated the deal in Beijing, China.

They called for strict feasibility studies.

Not being satisfied with our feasibility study, they even sent their own team and did a feasibility study. It was after this that they gave the money. Whatever the Opposition might say all these projects have been found to be feasible. The country must invest and after some time the benefits will kick into the economy.

There can be small problems. In any major project, this is the form. This is just a small percentage compared to the benefits that will accrue to the country. Whether the Opposition likes it or not, the Government will invest in these projects. These are vital for development and all these are paying propositions.

When we get 300MW on coal power coming into our grid, firstly we are giving electricity to everybody. Secondly we are reducing the oil import bill. Because of that we can keep the electrical tariff at a reasonable level. These are all benefits. Every one of those projects will begin to add value to our economy.

That is why foreign investors, foreign rating agencies, IMF and all banks see this as a growth prospect. What competence does the Opposition have to comment on these projects? Do they study these projects? Do they have access to a feasibility study? They are just on a mud slinging spree.

Q: The Government has focused attention on the city development program, specially the Colombo Municipal Council area and adjoining suburbs and a Metropolitan Corporation is also in the pipeline. How would this concept help improve the socio-economic standard of the people and what would be the main advantages of this innovative project?

A: Anybody will say that today Colombo is looking its best. Visitors to Sri Lanka say they are happy to come to Colombo because it is beautiful and safe.

If we compare Colombo with other cities in Asia , there is no doubt that it is one of the best. I cannot understand how anyone can complain about beautifying the city.

Earlier they said there were security checkpoints everywhere. Security barriers have now been removed and the people can move freely.

I invite the Opposition to go to Galle Face on a weekend and see the number of people who come there. Tourists also have a good impression of our country.

What are they talking about? This is only the beginning. Under the guidance of Defence Secretary Gotabaya Rajapaksa, Colombo will be made into a wonder city.

Secondly the Opposition comes with the stupid idea that there is militarisation. We have 150,000 war heroes, they have to be paid and kept occupied.

They have to be treated well. What does the UNP expect? Should they be sent back home or kept unemployed in their villages where they can then create mayhem? The Government will take the responsibility to look after them. They will work and improve the country. We should not forget that we have the best assets in the military.

Our latest communication technology is handled by the Army and not by the universities.

The latest jets and pilots are in the Air force not in the SriLankan Airlines. What about our Navy? It is one of the world’s best Navies. We have highly trained and motivated people. Now they are using that same skills to develop the country as well. What is wrong with that?

Q: What have you got to say about the United Nations attitude on the recent developments with regard to the termination of terrorism in our country and specially with the bold speech made by President Mahinda Rajapaksa at the last UN session?

A: The President has clearly enunciated Sri Lanka’s position. This was a war against terrorism. The people in the North and the East are our own people. The democratisation process through elections is taking place in the North and the East.

The Local government elections were conducted in the North and Provincial Council elections will also be held in the future. The diaspora and certain NGOs who were living off the war are disturbed.

They are using their leverage particularly in the US and the European Union to take revenge for having lost the war. This has nothing to do with what happened there. What happened there will be clearly enunciated by the LLRC. They have to wait till all this is clearly explained. The world is not the US and the European Union.

They are very important and we respect their views. We have to win them over. But there is a whole world outside as well.

Today the world is much more complex than when they planned. What has happened in the Arab States and the 09/11. Except Sri Lanka, the security situation is becoming difficult in most Asian countries. Things are changing. I think we have a very good future and we should be determined.