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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2767

The attitude of provincial governance impedes provincial development

By Quintus Perera - Asian Tribune

Dr Saratha Amunugama, Minister of Enterprise Development and Investment Promotion in a hard hitting speech was highly critical about the performance of the Provincial Administration (concept of Provincial Councils) saying that though they expected to be lead by technocrats, in actual fact, those who have lost parliamentary elections were given the opportunity at Provincial Councils.

He was speaking as Chief Guest at the Policy Constraints, Regulatory Barriers and Regional Economic Development Conference organized by the Federation of Chamber s of Commerce and Industry of Sri Lanka (FCCISL) at Hotel Galadari.

He said that the Provincial Councils are a hindrance for the provincial development as instead of offering incentives for the industries and investors to set up their businesses in the provinces, the Provincial Councils have been involved in collecting more and more funds by way of taxes and levies and distract the investors coming to the provinces.

Dr Amunugama said that Sri Lanka is not the leader to that regional growth, though there is a satisfactory growth here like 7 percent. The attempts are to reach double digit growth but one of the main challenges obstructing this growth could be vast disparity in the growth performances between the Western Province and the other provinces of the country.

The world economy was growing at the rate of five percent and this historical growth has been determined by the economies of Asia – countries like China, India and Pakistan and what is called the tiger states like Singapore, Malaysia, Philippines, Borneo etc. They are reaching double digit growth.

He said the growth in the WP could be around 12 percent which is equivalent to India and China. He said that nobody could say that Sri Lanka is incapable of achieving this rate of growth. There is growth in construction, growth in factories, investments, but they are only confined to WP.

Dr Amunugama said that Sri Lanka has Free Trade Agreements with India and Pakistan and Sri Lanka is striving now to have such agreements with all the countries in the South Asia Region. He said that Sri Lanka is the only country with GSP+ in the whole Region and 7,000 items are duty free. He said that two weeks ago one of the world’s biggest confectionary factories was opened in Katunayake which is ahead of ‘Cadburys’.

He said that the whole world is interested in the WP and there is lot of investment flowing into that Province. He said that there is tremendous growth and last week they have signed an agreement to construction the country’s tallest building of 60 stories in Battaramulla.

He said that there is vast gap between WP and other provinces like Central, Uva and Southern and if the two provinces involve in war are also included as in them there are very hard working people and they could also give support. Therefore peace is very important.

He questioned as to why there is such a big problem in Sri Lanka, why there is disparity in growth in WP and the other areas of the country.

He said that therefore the present exercise is very timely. One of the reasons why the performances in the WP cannot be matched could be the lack of infrastructure in other provinces and said “We should be ashamed as a country as we have not yet launched this infrastructure projects and even after 58 years of Independence we were not able to construct just 18 kilometres from Katunayake to Colombo.” He said that they have mega problems with regard to infrastructure.- basic infrastructure projects in transport, power and energy.

.Inaugurating and welcoming the distinguished guests, Macky Hasshim, Immediate Past President, FCCISL and former President, SAARC Chamber of Commerce said that the local private sector development can be influenced at three levels – national, regional and micro. Globalization gives rise to opportunities for local private sector development, but at the same time it can create new threats and challenges to local private sector development.

He said that liberalization and international trade agreements can generate both positive and negative impact on private sector development. Satisfactory macroeconomic framework and conditions are essential to sustain local private sector development. He said that however, no proper policy measures have been taken to develop such macroeconomic framework and conditions to direct private sector development in the country.

At this Conference, a consensus appeared have been emerged by the three leading speakers, Dr Sarath Amunugama Minister of Enterprise Development and Investment Promotion; Dr Saman Kelegama, Executive Director, Institute of Policy Studies and Dr Wilbert Gunaratne, Director, Centre for Development Research, Royal Institute of the inactivity of the Provincial Councils in assisting the development of the Provinces and thus apparently the PC system was a failure.

Dr Saman Kelegama, Executive Director, Institute of Policy Studies speaking on “The Role of Private Sector/ Chambers in Stimulating Regional Economic Growth said that since Independence, in the sphere of regional development the government and the people had a major role to play as in early days major industries were set up in the provinces like Kankesanturai Cement factory, Paranthan Chemical Factory, Valachchanai Paper Factory, but when these industries were moved to provinces, the regional comparative advantages were never taken into consideration.

He said that it would be easier for the government to cut the Capital Expenditure that was meant for provincial development rather than cutting current expenditure such as paying salaries, pensions etc. These Capital Expenditure cuts were affected to balance the budget deficits that has been widening since a number of years, and various institutions like BOI, Industrial Estates and Industrial parks do the same thing and people get confused as to where to go for assistance. All these impeded the provincial development, Dr Kelegama said.

The problem of devolution exercise prevents rural development. He said that if one looks at the provinces in our county they are demarcated according to administrative convenience and not on the basis of economic development.

He said that the Provincial Councils are not geared to promote economic activities and the key factor is the inadequacy of decentralization and due to these factors revenue mobilizing in the PCs are limited. He said that there is redundancy of existing systems, as there is the provincial council, the Government Agent, Kachcheri System and thus they create problems such as inability to mobilize funds. He said that most of these institutions are a failure, including the Southern Development Authority. The only successful institution could be the Mahaweli Authority.

He said that they were set up mainly to provide employment and regional development. Since 1977 both private and public sectors were involved in the regional development activities. Private sector was supposed to open up industries or agricultural activities using incentives but they were inadequate.

Such institutions like the BOI were set up for regional development and specially after the liberation of the economy, Donors also played an important role. In the context of regional development donors mobilized funds for mega infrastructural projects.

He said that the role of the donors gathered momentum after the economy was opened up and they not only involved in Mega projects but also in small projects and that is how most of these regional development activities have taken place over the years in the country.

State allowed and worked with Private sector and Donors to deal with mega projects like the Mahaweli, rural electrification, and irrigation and institutions relevant to the projects were created like the Mahaweli Authority. Likewise, private sector was called to engage in regional activities where the government took certain measures. But for their success there would have been proper infrastructure such as roads, telecommunication and Electricity.

He said that under the BOI 200 factories programme of President Premadasa provinces were categorized into difficult areas and most difficult areas and were given additional incentives, like tax benefits duty free importations etc. Now not only the BOI but the Ministries are involved in setting up industrial estates, industrial parks in pushing industries to the rural areas.

He said that now there is a programme of 300 factories where BOI is playing a rule to take them to the rural areas.

Dr Kelegama said that Mega or small projects they have also played a role in regional development. Though there has been involvement by the state, private sector and the donors initiatives, regional development has still not improved because the funds allocated through Capital Expenditure were not released by the government.

Dr Wilbert Gooneratne, Director, CDR, speaking on “Policy and Regulatory Issues Faced by the Regional Private Sector”, said that private sector is confronted with problems created by the prevalent legal and regulatory system.

While making a critical analysis, he said that he wished that Minister Amunugama would have been present while these crucial matters were discussed. (Though Minister Amunugama was scheduled to speak after Dr Goonaratne, he spoke first and left the venue).

Dr Gooneratne said that still the country’s legal and regulatory framework is outdated and despite over two decades of an increasingly liberal market economy, the bureaucratic system has remained rigid and control oriented, still glued to FR and AR and by and large not so business friendly. He said that the country is also having an outdated and rigid labour laws which tend to make private business operations difficult and cumbersome and complicates the employer-employee relationship.

He said the political issues have a bearing on local private sector development. The rather volatile and confused national policy environment the business community is confronted with is the result of the large number of ministries dealing with trade and industry or business in general. There is a situation of arbitrary bifurcation of related subjects which hampers focused orchestration of policies and programmes that are favourable for private sector business growth.

He said that even worse is the frequent change of ministers, often with different ideologies and said that they could avoided some of the negative fall outs of this kind of situation, but unfortunately they did not have both.

Dr Gonaretne said that the other political issue having an immense bearing on local private sector development is the prevailing and in some way deteriorating security situation in the country which has seriously affected the environment for business in the country in many different ways and said that everybody knows what it has done to the economies of the North and the Eastern provinces.

He said that a major issue confronting local business development is institutions: both the weaknesses of existing institutions and mechanisms and the absence of relevant institutional mechanisms that could support the growth of local private sector activities.

Roel Hackemuldar, Chief Technical Advisor, ILO Enter-Growth Project spoke on “District Enterprise Forums as a Dialogue Platform to Address Private Sector Related Issues and Krishantha Wisenthige, Manager Regional Affairs, FCCISL moved the vote of thanks.

- Asian Tribune -

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