There are altogether 40 companies in the banking, finance and insurance sector and among them only eight are mainly banks. They are the Commercial Bank, DFCC, HNB, Merchant Bank, National Development Bank, Pan Asia, Sampath and Seylan Bank. Others are in fiancé and insurance business such as Alliance, Asia Capital, Central Finance and The Finance. It is obvious that their presence in the provinces (to mean the provinces other than the Western) is fairly thin. There are 11 companies in the diversified sector with John Keels, Hemas, Richard Pieris, Hayleys and Aitken Spence rather leading.
Among the 19 in the food and beverage industries it is clear that the potential in the provinces are not being properly utilized. Only few companies are in the proper food processing or food industries and they also seem to operate through intermediaries. Some companies have introduced a ‘buy back’ system with benefits to the rural farmers. The majority classified under this sector however are in brewery, tobacco or beverages like Cola.
It might be the case that many of the (small scale) companies involved in the food industry are not listed companies (i.e. Nipuna, Araliya etc). Raigam Salterns listed only recently. However, the gap between the development or investment potential and the involvement of the established private sector in the food industry is considerably vast. The situation is rather alarming considering the importance of food security issues in the coming future. The crisis in this sector is still evident by the time of writing of this article after the unexpected floods in January and again in February (2011).
The potential in the tourist sector is considerably vast. The companies listed in this sector are named under ‘hotels and travel,’ and number 37. There are limitations of this sector as many of the companies are tagged very narrowly to maintaining hotels with limited facilities for transport, shopping and entertainment. The diversification in the industry is in order and there is major potential in spreading the industry into some locations in outer provinces.
Telecom industry is already spreading in the provinces and perhaps no need of special effort.
Agency for Promotion
The devolution arrangements under the 13th Amendment to the Constitution say the following in Article 154R (5). “The [Finance] Commission shall formulate such principles with the objective of achieving balanced regional development in the country and shall accordingly take into account –
(a) the population of each Province;
(b) the per capita income of each Province;
(c) the need, progressively, to reduce social and economic disparities; and
(d) the need, progressively, to reduce the difference between the per capita income of each Province and the higher per capita income among the Provinces.”
The constitutional formulation can be improved, but even with the existing weaknesses the prescription is admirable. One principle which is necessary in achieving balanced regional development might be the allocation of sufficient capital funds for infrastructural and development projects in the provinces. The Finance Commission (FC) also could monitor the contribution by the centre and the lines ministries and ensure equitable distribution. This was discussed earlier and previously.
There are of course other ways of evolving policies for balanced regional development. The initiatives could have come from the provincial councils or the Finance Commission. What is highlighted in this article is the seeking of the private sector cooperation in provincial development. In a recent circular from the FC, the provincial councils have been requested to “seek cooperation of private enterprises in implementing provincial development projects and make initiatives to develop methodology in launching public-private partnership (PPP) in joint venture projects.” The letter is dated 14 October 2010. This is admirable. However, it is not clear whether all the provincial councils; its politicians and even the officials properly understand what is meant by PPP.
Earlier when the FC made recommendations to the President on the apportionment of funds to be allocated from the Annual Budget 2010 to the Provinces, it also stated the following. This is dated August 2010.
“The Finance Commission has recognized the need for provincial councils to promote private sector investment and develop investment promotion strategies as a key policy initiative. Based on the experience of past two decades in the central government’s provincial investment, the continuing and widening disparities that have been shown through the Gross Domestic Product and similar indicators, attracting greater investment from the private sector is essential for the provincial councils.”
The recommendations also stated that “the Finance Commission will be initiating dialogue with the BOI to identify, prepare and promote investments in the provinces.” The BOI at present is going through considerable restructuring. It might also not be the correct or the sole focal point in promoting private sector partnership in the provinces given that the main focus of the BOI is to attract FDI (Foreign Direct Investments) to the country.
The efforts of the FC could be multifaceted making links with the local listed companies at the Stock Exchange, the BOI companies as relevant and the various Chambers and Industrial Federations where most of the local companies are organized. The most important would be to workout parameters within which these links and cooperation could be established.
Strategy for Promotion
Apart from the Finance Commission working on a sector basis (i.e. tourism, food, finance etc.) in promoting investments in the provinces, the other potential strategy would be to making links with leading private sector companies and promoting them to expand their businesses in the provinces in general or in selected provinces.
The business magazine LMD annually ranks the top 50 business establishments in the country. For the financial year 2009/10, the tope 10 are listed as follows:
Sri Lanka Telecom
John Keels Holdings
They differ on profits, assets, shareholder funds, market capitalization, earning’s per share and dividends per share. Some have performed better in many areas than others for example, John Keels Holdings. With over 5.5 billion profits after tax for the year, the JKH were leading in both shareholder funds and market capitalization. Nevertheless, it is worth working with all of them also counting on their social profile. Corporate insights of these companies are usually given in their company annual reports. Also they appear in the LMD magazine.
While they often refer to corporate social responsibilities (CSR) in a big manner in their statements, very seldom or never at all that they refer to expanding their activities into the provinces outside the western province as a ‘corporate social responsibility.’ It might be necessary to promote the ‘balanced regional development’ as a corporate objective. However, the invitation to the private sector in investing in the provinces should not confine to the CSR. The CSR is a matter for them to decide and the effort should be to develop and encourage the private sector itself or the private sector development (PSD) in the provinces.
Another way of working with the private sector is to make links with the leading Directors. The LMD (December 2010) gives names of 22 leading Directors in the private sector (only one woman!) and those will be useful contacts for the Finance Commission. The leading names are: Ranjeevan Seevaratnam, Ajit Gunewardene, Ronnie Peiris, Susanth Ratnayake, Mohan Pandithage, Harry Jayawardena, Rajan Asirwathan, Ajit Jayaratne, Jayampathi Bandaranayake, Anthony Page, Rajan Brito, ATP Edirisinghe, Dr. Uditha Liyanage, AR Rasiah, Deva Rodrigo, JC Page, KDD Perera, AK Gunaratne, Anushman Rajaratnam, SDR Arudpragasam, Sarath Genegoda and Rohini, Ganegoda.
The private sector development in the provinces should take diverse ways. The promotion from outside and promotion within provinces are necessary. One tangible way of promotion within provinces is to promote the Stock Exchange. At present the Colombo Stock Exchange has only few branches and the promotion is necessary in other areas in provinces and districts. Both the Colombo Stock Exchange (CSE) and the Securities and Exchange Commission (SEC) are apparently keen in promoting the stock market through various ways.
– Asian Tribune –
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