It is a known fact that for a country to surge forth, a well poised and collective growth of agriculture, industry and services sectors are essential. When these key sectors are aligned, tertiary sub sectors would naturally follow. In the Sri Lankan economy, while the services sector provides the highest contribution, the industry segment as a whole provides the second highest input with manufacturing enterprises contributing the major share.
However, the potential of the manufacturing sector is much higher than the prevailing capacity. Industrialisation is a sound solution to unemployment as it is capable of providing more jobs than the other two. This also encourages innovation that is important for the advancement of the country.
If steps are taken to encourage, build and grow manufacturing, the projected economic growth by the new regime will not be a daunting task. When this area of the economy is developed, the standard of living, employment and overall productivity can be developed further. Historical data reveals that manufacturing in Sri Lanka thrived until the late 1970s, when the economy was liberalised by the then government.
The adult population in the country has witnessed the mega industries that prevailed and operated successfully, catering to almost 100% of the local needs of cement, steel, ceramics, paper, leather, vehicle tyres, textiles, sugar and many other products. All these large scale manufacturing industries were owned by the state sector. Foreign exchange was saved and utilised only for essentials and not for the numerous non essentials as it is today. However, the liberalisation of economic policies in the year 1977 ended this enormously successful trend.
Many state owned enterprises were privatised and foreign investors invited, by offering fiscal and other concessions. Several industrial promotion zones were introduced. The control held over many essential products by the state automatically ceased to exist.
Whether the impact to the economy by the act of liberalisation is beneficial or not, the subsequent effect must be discussed in a different forum. Nonetheless, the move certainly has its advantages and disadvantages as per this writer’s opinion.
However, the fact remains that with the Covid-19 pandemic, the global restrictions imposed on logistics have sparked a storm of nationalism and financial speculation. This has made almost every country to re-visit and analyse the concept of control over imports and encourage native manufacturing. Sri Lanka is no exception.
Import restrictions
The Government hastily brought in bans and import restrictions on hundreds of non essential items to control the outflow of foreign exchange. Billions of dollars of vital foreign reserves were saved by this timely act. It was a shocking revelation to observe the list of these banned products and the staggering amount of foreign currency spent on non essentials. Local industrialists confidently declare that almost every product in the banned and restricted list can be produced in Sri Lanka in the same or better quality levels. According to them, even raw material for most of these products can be found or produced in Sri Lanka.
President Gotabaya Rajapaksa has taken a decision, probably one of the most effective during his short period in office to appoint a task force with the best available expertise in the country, for economic revival with the emphasis to develop and upgrade the local manufacturing sector.
Although, the recommendations are yet to come, the entire country is looking forward to hear the new policy decisions. Although Sri Lanka is known as an agricultural country, the manufacturing sector helps the growth of the economy enormously.
The Government’s decision to ban and restrict imports will help control the outflow of foreign exchange and boost the much needed foreign exchange reserves. On the other hand, more importantly, the move helps Sri Lankan manufacturers to build existing manufacturing facilities, enter into new ventures and also diversify business to other areas of manufacturing. In addition to financial benefits as business entities, the development of the sector will provide a substantial number of employments.
At present, many students who enter the job market after completing various study programs, particularly technically specialised courses offered by vocational training institutes encounter difficulties in obtaining a suitable job due to the inadequate industrial production facilities. Students of these technical training institutions are mostly suitable for manufacturing sector jobs.
This is an escalating issue and needs solution promptly. Idling of these youth is not only counterproductive but a waste of human energy if not utilised timely and effectively. The manifesto of President Rajapaksa gives due importance to native industrial development. Therefore, the Government will focus attention on the opportunities available in the world market, particularly after the Covid-19 pandemic, with many doors opening for new business.
Sri Lanka’s performance of manufacturing exports has been lacklustre as against the performance of other countries in the region. By analysing the market demand in the world and encouraging the local manufacturers and investors, the country can achieve great heights in this segment.
There are several, mostly foreign owned, fully export oriented medium scale manufacturing enterprises operating in Sri Lanka successfully. As per records, over 20,000 employees work in these organisations mainly located in Export Processing Zones.
Industrial development is described as economic development focused on the manufacturing industry sector. The operative word is that there is a focal point of finding and working with manufacturers and supply chain prospects. With the formation of the new government which is certain to continue, a new name has been bestowed on the former Ministry of Industry and Commerce.
Industrial development
The entire nation is aware that the former Ministry was a horrifying failure during the past five years.
The new Ministry is rightly named as Ministry of Small and Medium Business and Enterprise Development, Industries and Supply Chain Management and the public eye is on them, looking for performance.
This Ministry is the key player and the sole authority in the country on the subject of industrial development. The Ministry website contains strong messages with numerous tasks highlighted.
It states, among other messages, that the Ministry has been assigned the functions of planning, formulating, coordinating, implementing and setting up of infrastructure for the promotion and development of the industrial sector.
However, how many of those tasks are being carried out effectively and efficiently is a pertinent question to the industrialists and to the public.
During the past several decades, it is doubtful whether the assistance was extended to the manufacturing sector by the Ministry.
It is, therefore, the duty of the new Minister and his officials to be proactive and provide strong leadership to this all important Ministry which can provide yeomen service. As in the past, industrialisation provides numerous opportunities to the economic growth of the country.
In a world which is technologically advancing every second, proper development and management of manufacturing enterprises provide opportunities for more growth.
With the increasing population growth through which the demand for goods and services increases, industrialisation offers more financial opportunities for industrialists.