New political direction and its impact on Economy

(Excerpted from the Merril J. Fernando autobiography)

No memoir straddling the period of the 1950s would be complete without a reference to the changes in our society, arising from the overthrow of the United National Party (UNP) Government in 1956, in power for two consecutive terms since Independence. The political, social, and cultural changes set in motion by the election victory of the coalition forces led by S. W. R. D. Bandaranaike, comprising the Mahajana Eksath Peramuna (MEP), permanently re-configured the political and the socio-economic landscape of the country.

That victory also ended the single party dominance which the UNP had enjoyed, for eight years of parliamentary rule since Independence, paving the way for the many subsequent instances of a major party assuming power, in combination with one or more smaller parties. The implementation of S. W. R. D. Bandaranaike’s pre-election assurances of language reforms and the nationalisation of large private enterprises, the latter comprising largely of British vested interests, soon brought about a new political and economic order, based on left-of-centre dogma conflated with strong anti-imperialist sentiment.

It resulted in the nationalisation of many successful businesses such as banks, insurance companies, and public transport. I recall that the many strikes that took place during this period, never before experienced in the country, had a crippling impact on imports and exports. The port workers strike of 1959 hit all industrialists equally.

Old-timers in the industry will no doubt recall the part played in easing tea exports by the Trincomalee Tea Administration (TTA), established in 1957/’58, specifically as a counter to the disruptions to tea exports by frequent work stoppages at the Colombo Port. I think that period also marked the beginning of State capitulation to trade union pressure, for increases in wages and salaries as well as the enrichment of other conditions, without corresponding returns through improvements in output.

The SWRD regime, meek in the face of worker agitation, very unwisely established the precedent for the State subsidization of unproductivity, emulated as and when dictated by political expediency by every government which followed. Unlike the MEP regime of SWRD, the preceding UNP governments, whilst consolidating post-independence parliamentary democracy, also exerted stronger control over both the economy and the administration, as well as on civil society.

However, despite the administrative and fiscal stability that the UNP governments ushered in after Independence, there was a strong groundswell of nationalist sentiment against the second UNP regime under Sir John Kotelawala, and that momentum was reflected in the comprehensive defeat of the UNP in 1956. My clear recollection is that whilst the ‘Five Great Forces’ – Sangha, Veda, Guru, Govi, and Kamkaru – arraigned behind SWRD, were expected to offer a serious challenge to the ruling party, very few would have envisaged the complete rout of the UNP that was the election result.

Whilst the foreign policy of the MEP regime was ostensibly neutralist, there was a visible leaning to the left, with the establishment of the first formal diplomatic relations with both the USSR and China, soon after SWRD assumed the premiership. The contrast with the foreign policies of the previous UNP governments was sharply outlined, on account of the latter’s clear alignment with British interests in the South East Asian region in particular. Unarguably, the opening of government to government relations with the Soviet Union and China, eventually resulted in long-term benefits, especially for the tea trade in the case of Russia.

In fairness to SWRD, it may be said that he turned the country away from heavy dependence on Western or pro-Western power blocs and steered it along a more non-aligned direction, expressed more clearly in the foreign policy implementation of the later regime of his widow, Sirimavo Bandaranaike.

SWRD and the plantation economy

With regard to the plantation sector, which reflected British dominance more aggressively than any other segment of industry, there had been vigorous left wing agitation for some time for its nationalization. However, during his relatively short period in office, there was no indication that SWRD was prepared to immediately enforce such a move although, on account of the political thinking of the SWRD regime, influenced by its Marxist coalition partners, that apprehension was ever present.

For the time being though, the plantations and allied commercial interests, which were then the largest foreign exchange earners for the country, remained mainly in the hands of the British and a few local entrepreneurs. However, the increase on tax on business profit from 25% to 30% and the enhanced export duties placed additional burdens on an industrial sector already under severe internal pressure on account of intermittent strikes and other interruptions to production. In my view, the most glaring weaknesses of the SWRD administration were its tolerance of industrial indiscipline and the management of the economy.

Notwithstanding his clearly opportunistic conciliation of nationalist sentiment, which propelled him to victory, S. W. R. D. Bandaranaike was still pragmatic enough to realize that a sudden disruption of the plantation economy and the closely-interconnected ancillary interests, then the primary source of Ceylon’s foreign exchange earnings, would have completely destabilized the country’s economy.

However, at the Planters’ Association AGM of 1957 chaired by Senator Thomas Amarasuriya (the first Ceylonese to be elected Chairman of the PA), to which Prime Minister Bandaranaike was an invitee, the latter had, in his speech, indicated clearly to the plantation representatives that nationalization of plantations was a key component of his Government’s strategy, though that would be the last measure in the Government’s nationalization programme.

Having said that, SWRD had also given the assurance that adequate notice would be given to the interests likely to be affected. The establishment, in 1958, of the State Plantations Corporation, was also an early warning of the thinking of the regime that plantation ownership and management would no longer be a private, colonial preserve.

In the meantime, the restrictions imposed on expatriates working in the country forced many of them to leave. Among them were experienced planters and tea tasters, many of whom relocated to African tea-growing countries, both in the South and the East of that continent, and helped to develop the industry in those locations with expertise acquired in Ceylon. Others took up employment in the plantation industry in South East Asian countries. Those countries which benefited from the tea experience of our country are our strongest competitors today.

Quite apart from all the above factors, the fear of nationalization itself had a negative impact on the development of plantations, especially those owned by British companies. The older generation of plantation managers and others associated closely with the industry will recall that those estates, owned mostly by ‘Sterling Companies’ as they were known, comprised the cream of our plantations.

Land reforms and conseqences

The biggest impact of the new political direction was finally felt when it paved the way for the Land Reform Policy enactment of 1972, implemented during the tenure of SWRD’s widow, Sirimavo Bandaranaike, as Prime Minister. In its initial stage it vested over half a million acres, about two-thirds of that extent in tea, rubber, and coconut, with the Land Reform Commission (LRC).

Whilst some of the land thus acquired belonged to British plantation companies, the major proportion was locally owned. Although one of the stated objectives of this exercise was the redistribution of land amongst the landless, only a fraction of the acquired land eventually found its way in to the hands of the Sinhala peasantry.

The actual physical transfer of ownership took place in 1975/’76, with acquired plantation land being divided between the Sri Lanka State Plantations Corporation (SLSPC) and the Janatha Estates Development Board (JEDB). The newly-formed Up-Country Cooperative Estates Development Board (Usawasama) also received land for management and re-distribution. So did various village cooperative societies and councils.

Though the latter two categories had minimal competence in large-scale plantation cultivation and land and crop management, the leading politicians of the day, with bland confidence, made public statements that such acquired land would be intensely cultivated and productivity increased. Another noble proposition was the cultivation of food crops.

There is no quantifiable evidence of the results of such initiatives, if indeed they ever did take place. In reality, the damage to the well-regulated plantation industry, caused by the deeply-flawed implementation of a broad initiative, configured ostensibly for national benefit, was irreparable. In my view, despite the re-privatization of plantations in 1992, it is unlikely that the industry will ever fully recover from the detrimental changes resulting from such politically-motivated restructuring.

A time-tested management structure built on the experience of over a century, with its accumulated wisdom and knowledge, was replaced by a politically-oriented State administration, hastily cobbled together, literally overnight. The equally-hurried and insensitive implementation of the `Sinhala Only’ policy and other related reforms introduced in 1956, marginalizing minority communities, led to sporadic ethnic conflicts, commencing with the 1958 Sinhala-Tamil confrontation, igniting a long-simmering inter-community discontent and culminating in a 26-year civil war.

The latter, for its duration, hamstrung all development activities, public and private. Despite the conclusion of the conflict over a decade ago, the country yet remains divided along ethnic and religious lines and mired in internal disaffection and controversy, affecting every aspect of national progress.

The actual events briefly alluded to above have been written about, discussed, and analyzed exhaustively in the decades since. Their long term adverse consequences are also now visible, as clear evidence of the imprudence of the thinking which set those processes in motion. Therefore, I do not think it necessary for me to debate those issues in any greater depth in this narrative, except to say that the truth of the old adage, ‘the road to ruin is paved with good intentions,’ has been proven time and time again.

During the SWRD period, I developed a close friendship with the late Sarath Wijesinghe, a very successful proprietary planter, businessman, and reputed politician. He was Parliamentary Secretary to the Minister of Finance in the SWRD Cabinet whilst also being a member of the Senate. He subsequently served as the Minister of Nationalised Services, Minister of Labour, and the President of the Senate.

Despite his wide-ranging successes and wealth, and the high-profile positions he held in both Government and the private sector, he was a simple and approachable man. He was also Strikes Commissioner, appointed by Prime Minister SWRD, during a period of wide-spread union agitation in the country. Later I became involved with him in neutralizing union action launched by a very strong trade union controlling the export trade.

Three export companies were blockaded by striking workers. We were able to bring in workers from outstations, who were assembled at Independence Square by dawn and then transported to the three companies. Though there were violent responses from the striking workers, nobody was injured and the strikes were settled by the morning of the third day.

Overall, the SWRD period of governance was signposted by frequent strikes and civil commotions, which had a crippling impact on industry, especially the tea sector. With its almost total reliance on the export of bulk, ease of transport and shipping were a vital necessity and they were the dimensions affected most by the intermittent disruptions.