Single window system created to provide all facilities to exporters
- Minister Sunil Handunneththi January 12, 2025 By Uditha Kumarasinghe
Q: What are the steps being taken under the election pledges and manifesto of the NPP to develop industries in Sri Lanka?
A: We hope to strengthen the local production economy and create wide public participation for it. What happened in the past was that instead of strengthening the local economy, more room was given to encourage imports thereby weakening the local economy. These are two different policy directions completely. The turning point is how we can make value addition to the agricultural, industrial and service-oriented products in the country. Sometimes, we have to go against the existing rules and regulations as foreign goods and services have been encouraged. Such moves had discouraged local goods and services.
At present, our gem industry is facing this crisis. Gems are largely imported from countries such as Madagascar, Kenya and Mozambique. Such imported raw gemstones are processed in Sri Lanka and reintroduced to the export market. However, VAT is imposed on such gems which are processed here but VAT is not charged for imported processed gemstones. Therefore, the price of the gems in the international market is less than our local prices.
This applies to sugar as well. The tax is not imposed on imported white sugar but VAT is imposed on locally produced brown sugar. As a result, a kilogram of brown sugar is sold at Rs.360. There is an institutional network which produces brown sugar such as Pelwatte, Sevanagala, Gal Oya and Ethimale. These industries have provided employment to farmers and contribute to uplift the economy of nearly 500,000 people. However, the policies implemented in the past had weakened this process. There is an issue and we have to rectify this policy error.
According to the IMF agreement, VAT has to be imposed on all goods. Through that they expect to increase the Government’s revenue. If the VAT is exempted from some goods such as gems, the Government can get more income rather than imposing the VAT.
Locally manufactured products have to compete with the quality of imported goods. For example, Rs.20 tax is imposed on locally manufactured safety matches. However, lighters are available in the market at Rs. 20. Goods which are equal to the tax of a safety match are freely available in the market and this is the issue. Our mandate is based on increasing national production and now we are taking policy decisions in this regard. The impact caused by the old policies has not yet been done away completely. We are now in the process of removing their adverse impact and formulating industrial policies in accordance with the new mandate.
Q: Do you have any special plans to develop the SME sector?
A: Definitely. The key objective of our Ministry is to develop the SME sector. At present, all small- and large-scale institutions such as National Crafts Council, Laksala, Salusala, Small Entrepreneurial Division (SED), National Entrepreneurial Development Authority (NEDA), Industrial Development Board (IDB) and Export Development Board (EDB) which help to develop the SME sector are under our ministry purview. This means that we have the institutional framework to manufacture goods until they are introduced to the foreign market. We have several credit schemes to assist those who have faced hardships to continue their industries. At present, many entrepreneurs and industrialists have gone to the crib and turned into the level of Non-Performing Loans (NPLs) but that is not a wilful default.
Entrepreneurs had to face a series of issues in the recent past due to Covid-19 pandemic, increase in bank interest rates, lack of raw materials and import restrictions. Now we have formulated a system to provide them loans and uplift them. However, the recommendations by the Ministry are not accepted by the banks. Banks have the responsibility of recovering loans and they only provide loans to those who are running their business well. They don’t provide loans to those who have entrepreneurial skills but are not in a position to produce any collateral. There is a risk of granting a loan to such a person but somebody must take that risk. If the Ministry takes that risk and facilitates as the guarantor, banks don’t provide loans to such entrepreneurs to develop their industries. Steps are being taken by the Ministry to resolve these issues.
The National Productivity Secretariat is an important institution which comes under our ministry and it didn’t operate properly during the recent past. At present, we have drafted a Cabinet paper to declare 2025 as the National Productivity Year and make the assessment in 2026.
During this year, we will take measures to implement productivity criteria in all state institutions. It will be made mandatory to all state institutions and enterprises to act in accordance with our productivity criteria and KPIs set out.
Q: Industries faced a big setback owing to the Covid-19 pandemic and also the 2022 economic crisis. What are the steps being taken to revive such industries which have gone bankrupt during those periods?
A: Under our umbrella, we would facilitate basic requirements such as working capital, technical assistance and introduce products to the export market. At present SED, NEDA, IDB, EDB and the division of providing bank loans to entrepreneurs are making collaborative efforts in this regard.
We have 20 sectoral policy divisions such as apparel, fisheries, manufacturing and automobile, spices, confectionery and the construction sector. They will formulate the policies and the Ministry will take steps to implement them. The role of the ministry is to play the facilitators’ role to assist those who have engaged in various industry sectors to overcome their hardships and move forward.
Q: Regarding the development of entrepreneurship, are you considering moves to integrate entrepreneurship into the school and university curriculum?
A: We should make collaborative efforts. There is no use of training entrepreneurs only to sit for examinations and they should be brought into the practical level. For example, we have the Sri Lanka Institute of Textile and Apparel (SLITA) for the textile and apparel sector. We hope to upgrade its curriculum to the level of a degree awarding institution. We also have the National Design Centre and we should affiliate it with the Moratuwa University. The EDB should also be connected with the Technical Colleges.
SED, NEDA, IDB and EDB officials are at Divisional Secretariats countrywide but the people are not aware of it. An entrepreneur should commence an industry after consulting and getting expertise from these officials. At present, our industrial zones are in an isolated situation. There are so many industries in one particular industrial zone. Our plan is to introduce one industry for each zone. We also intend to set up a zone based in Colombo for the gem and jewellery industry sector which would operate round the clock. There should be a separate zone for the apparel industry as well. We have also drawn up plans to set up a chemical zone in Paranthan.
Q: Those running many industries don’t know how to enter the export market. Is there a program that helps them diversify their businesses into the export market?
A: We have created a single window system to provide all facilities to exporters. Such a system was not available in the past and we have now commenced it. The EDB has trained officers for this purpose and we have identified their district level officers. We should strictly consider which product should be given priority in our exports. The biggest issue faced is the industries cannot find markets.
There are emerging markets such as the Middle East where we can promote our own identity. There is a big market in the Middle East for Sri Lankan tea, rubber-based products and spices. Some of our agricultural products can also be introduced to the international market through industrialisation.
Q: What are the plans to get foreign investments into local industries and SME sector?
A: We have completed its initial step. We have educated investors that they don’t need to give any commissions or bribes. Soliciting bribes was the key reason for not getting investments into our industries. Now the investors don’t need to meet politicians and offer them bribes. The second factor was the inordinate delays where the investors had to wait for several years until the approval process was completed.
At present, we are taking steps to turn it into a more flexible and easier process. Thirdly, there is a complexity of our tax policies. Taxes have to be paid before that particular industry commences and we are taking steps to overcome that situation. We have taken steps to make this process easier through the Science and Technology Ministry and Digital Economy Ministry. We have decided to call EOIs through an open tender procedure to some sectors such as Eppawala Phosphate, Kahatagaha graphite and Pulmudai mineral sand.
It is the people who have safeguarded most of the institutions which are planned to be closed down. It had been listed to sell most of the institutions such as Kahatagaha graphite, BCC, Paranthan chemical factory, Pelwatte and the Sevanagala sugar factories which come under the purview of the Industries Ministry. However, the employees of those institutions worked hard to safeguard those institutions. We have decided to restart the Valaichchenai paper mill and our target is to provide the country’s paper requirements through this. We have called upon all Government institutions to provide their waste paper to us and we would recycle them and convert them into newsprints and other stationery. At present, we have commenced the modernisation of the paper mill for this purpose. Under the Clean Sri Lanka Program, we hope to set up waste paper collecting centres at each Government institution by March this year.
We don’t need to import cement when the Sri Lanka Cement Corporation commences the manufacture of cement. Arrangements have been made to set up cement factories in Puttalam, Mannar and Elephant Pass. The private sector can compete with us. What happened in the past was that the Government didn’t compete with the private sector and the Government voluntarily accepted the defeat. Now the private sector has to get ready to compete with the Government in the market. The Pelwatte and Sevanagala sugar factories will commence to produce brown sugar using new technology. Ethanol is a byproduct of sugar. In future, we hope to produce ethanol at a lower price. When sugar production is increased, its byproduct of ethanol will also be increased so that we would be able to manufacture and introduce a liquor brand to the market at a lower price. At present, 250,000 litres of illicit liquor is consumed by the people per day.
Q: Some industries are worried about the tax burden placed as a result of the IMF agreement. Will it be possible to reduce the tax burden on the industrial and SME sector to encourage them further?
A: This has become an issue for us. As far as I know, the IMF has not imposed any conditions recommending this percentage of tax should be imposed on that particular item. The IMF in its recommendations has said that the Government has to increase its revenue and manage the expenditure. If we can show that Government revenue can be increased by lifting the VAT on some products, then the problem will be sorted out.
This problem doesn’t arise when some goods which are subjected to VAT are exported. Then we should find the export market. I have taken a decision to produce organic sugar and we have reserved the first 100 hectares for it. Organic sugar can be exported worldwide and it has a very good demand and no VAT is imposed on it. There is no change when a gemstone is exported to a foreign country or a foreigner comes to Sri Lanka and buys it. Therefore, the issue is with this interpretation and we should change it. We should fulfill our requirement without causing any harm to the IMF agreements and we can fulfill that task.
Q: The Opposition alleges that the NPP Government also continues former President Ranil Wickremesinghe’s program. Would you comment?
A: They expect the work to be done by the Government in five years to be completed within 49 days. It was the Opposition which criticised earlier saying that the Government is full of inexperienced people and that they cannot fulfill their duties. However, they expect the task to be fulfilled by them in five years to be completed within 24 hours. As the Opposition claimed, if we are ‘inexperienced’, at least they should give us a fair time to learn and fulfill our duties. Are we also doing the same things done by former President Ranil Wickremesinghe?
If Wickremesinghe was in power for 100 days, how many foreign visits would he have made during that period? How many times has his Cabinet Ministers gone abroad? None of our Ministers has done so. They can make a comparison on the expenditure of former President Ranil Wickremesinghe and incumbent President Anura Kumara Dissanayake. How much was spent on former President Wickremesinghe’s security. How many chefs former President Wickremesinghe had and the current President Dissanayake has.
If we want, we have a two-thirds majority to spend money lavishly but our ultimate goal is not that. Ranil Wickremesinghe’s intention was to sell state enterprises and our intention is to safeguard them. We have already safeguarded some of the institutions which had been listed by Wickremesinghe to sell. Then how do they say we are also continuing the same program introduced by Ranil Wickremesinghe. That is completely wrong. Can the people be satisfied with our performance compared to the former administrations? Of the 38 essential food commodities which are sold at the CWE, the prices of 20 such commodities have been reduced. The price reduction of some goods is less than 200 percent. However, we have to concede the fact that we are working with the same officials who had worked with previous administrations. These are the mechanisms created by them. The tourism industry has made significant development as the country’s law and order situation has been ensured by the current Government. At present the country’s fraud and waste of politicians has been largely checked.
Q: According to you, how a political movement which earlier had three MPs in Parliament was developed to the level of securing 159 MPs in Parliament with an overwhelming majority?
A: Earlier, when power was shifted from one Government to another, the same old system was continued and there was no change of the system. However, this is a new system transformation. Therefore, it will take some time to see the results of such a system transformation. Actually, this is a shift from the old system to a new system. We have done away with the old system and commenced the beginning of a new system. So, this is a transitional period and its end results cannot be seen now. The people’s attitudes, economy, social status and administration system should be changed. We should go for quick approaches and new innovations while infusing new technology.
This is going to be a massive transformation and we have commenced that. I think this is a new development not only in Sri Lanka but also in the whole of Asia. The people are not ready to give up the victory they achieved by making huge sacrifices over the past few decades. Therefore, if we also make any mistake, the people will get rid of us. Handunneththi is not important to the people. They only wish to secure this victory they achieved. If Handunneththi doesn’t work hard to secure that victory, they will ignore him and concentrate to safeguard the victory because the people are not ready to reverse the victory they had achieved.
Q: The Opposition and various other sectors have raised concern on the Government’s decision to remove unnecessary modifications and accessories of private buses and three-wheelers. They are of the view that there is a large number of people who depend on the vehicle modification industry. Your comments?
A: How many illegal industries are there in the country? Drugs and the underworld can also be described as industries. If the underworld is curbed, an underworld character might say that he is not in a position to look after his family. Demanding ransom is also illegal and those who resorted to it can say not to curb it. However, that cannot be permitted. Those illegal activities could have prevailed in the past but not now. Have we imposed any fine as we asked to remove those bus and three-wheeler modifications? We have only educated them to remove those modifications.
It hasn’t become a hindrance to the transport activities. We are only rectifying those errors and that is also not done by force or imposing fines. That is not what Clean Sri Lanka really means. It really means to eradicate rural poverty and change the attitudes of the people. Removing these bus and three wheel modifications is just one aspect of it.⍐
