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Revitalization of industrial development in Sri Lanka

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Dr. René van Berkel outlines the UNIDO Country Programme for Sri Lanka (2021-25)

The United Nations Industrial Development Organization (UNIDO) recently commenced its 18M Euro Country Program for Sri Lanka, under the auspices of the Minister of Industries Hon. Wimal Weerawansa. At the signing ceremony Weerawansa expressed his appreciation to UNIDO for extending support to the Sri Lankan industries under UNIDO’s mission of promoting and accelerating inclusive and sustainable industrial development. The Secretary to the Ministry of Industries, Gen. Daya Ratnayake, signed the new Country Program on behalf of the Ministry, while Dr. Rene van Berkel, UNIDO Representative for Sri Lanka signed for UNIDO. Nawaz Rajabdeen, National Director of UNIDO’s Focal Point Office was also present at the occasion.

The ceremony was followed by the inaugural meeting of the Sri Lanka Joint Steering Committee for UNIDO’s country programme chaired by the Gen. Ratnayake and attended by representatives of relevant government and private sector stakeholder institutions. At the commencement Dr. van Berkel shared some highlights on Sri Lanka’s manufacturing sector review by UNIDO. While Sri Lanka has moved upward on the development ladder and is currently approaching upper middle-income graduation (99.1% of threshold), Manufacturing Value Added (MVA) in 2020 was 16%, whereas for example Indonesia achieves 20% and Thailand 26% therefore indicating a wide gap. Statistics also show limited diversification particularly in terms of exports and employment. The Medium and high-tech (MHT) is at a relatively low level in Sri Lanka at 7-8%, while it is up to 40% in other middle-income countries in South East Asia. However, these could also be seen as opportunities, pointed out Dr. van Berkel, who went on to share insights into the Country Program.

Sri Lanka is at 77th out of 131 indexed countries in UNIDO’s index for Sustainable Development Goal 9 on inclusive and sustainable industrialization. There is potential economic vulnerability arising out of early de-industrialization and limited diversification. Manufacturing growth in the country is seen hindered by lack of entrepreneurship, innovations, technology and management skills; low investor confidence; shortage of productive/skilled labour; limited diversification; and quality/trade access. This is a concern, as there is international consensus that the level of income must increase beyond a certain value before manufacturing can be decreased. This can be considered an economic vulnerability in terms of Sri Lanka.

Past UNIDO Assistance

In the recent past, UNIDO has worked mostly on the environmental domain and focused on hazardous chemicals. The focus later shifted to the quality infrastructure in Sri Lanka by improving and upgrading the operating procedures of different quality institutions, and how businesses need to be run with additional training and the building of competencies to improve national quality infrastructure (NQI).

UNIDO has also provided expertise to MSMEs in the food and spices sector, to improve their manufacturing practices, food quality, and food safety – which were highlighted as key areas of concern. An example would be the certification procedure for ‘Pure Ceylon Cinnamon’ for additional brand value. This certification is currently at the final stages of approval in the EU.

Another UNIDO project focused on bamboo, which is a natural solution against waterlogging. Bamboo is also a biomaterial that can be used for energy, and as an alternative to wood for handicrafts, furniture and household utensils. UNIDO assisted the bamboo sector in Sri Lanka by promoting better seedlings and carried out some work on setting up bamboo plantations and of a training and demonstration centre at the Industrial Development Board. Bamboo was seen to be particularly beneficial as an inter-crop in tea estates with many benefits including shade and improved agronomy of the plantations.

The upcoming UNIDO Country Program in Sri Lanka (2021-2025)

Objective of the UNIDO Country Programme is to provide a programming framework for identification, development and execution of catalytical technical cooperation services in the country. It is expected to achieve and sustain critical impact at scale through: Government co-ownership and inter-ministerial coordination; Focus on prioritized industrial sectors or areas matching country needs and UNIDO comparative advantages; Inclusion of policy advisory services; and Engagement and synergies with partner interventions to upscale results. It was noted that projects under the program depend on partners and the funds available.

The major thrust areas of the program include Industrial Development Policy, Value addition to produce and Solutions for climate resources.

1. Industrial Development Policy

For the industrial sector to grow, there must first be a consensus among the policymakers and key stakeholders on the priority actions. This emphasizes the need for industrial policymaking – which is a process, with specific instruments, building capabilities of institutions, delivery, monitoring, and evaluation, supported by industrial statistics and information that can made available. A public-private partnership would be essential, where the Government, chambers, and industry associations work together closely.

Under the policy, driving manufacturing excellence and entrepreneurship needs to be a top priority, where businesses are encouraged to be adopt modern management practices and capture business opportunities.

2. Value addition to produce

Sri Lanka is endowed with many natural resources ranging from fisheries, rubber, coconut, tea, etc., but the amount of value that is being generated is comparatively low, for both the domestic and international markets. Lack of sufficient advanced processing is seen as one key reason. Entrepreneurs need to recognize that there is an opportunity to make more money out of what is already available – by improving food safety, targeting the higher markets, and advanced processing – not forgetting the processing and quality infrastructure which also needs to be developed.

3. Solutions for climate and resources

This area basically deals with minimizing environmental impacts. Industries are the polluting agents and contribute to the climate problem, but they’re also an integral part of the climate solution. Eventually, businesses would need to come up with energy-efficient products. There is also a call to shift to source energy from renewable sources such as hydropower, wind, solar, bioenergy etc. The ultimate transition would be towards a Circular Economy -– changing the fundamental approach of taking things out of the environment, making things, using them, then throwing them away – which is a linear cycle. Instead, the Circular Economy defines the cycle as: take – make – use – reuse – recycle. In a circular economy, the waste is in fact being designed out. Hence zero waste – and zero recycling. It makes excellent economic sense in manufacturing terms too.

Opportunities for Sri Lanka

The Covid pandemic has caused a massive impact on the global manufacturing sector, and Sri Lanka is no exception. Businesses would now need to spend more attention on health and safety now than ever before. Accordingly, workplace practices would need to change to accommodate new health guidelines, and work procedures too will have to be adjusted.

Accelerated as a result of the pandemic, digitalization has been seen vigorously taking place around the world. For instance, payment and marketing are already digitalized by industries across the board. But the Fourth Industrial Revolution (4IR) will create digitalization within the manufacturing process. It is envisaged that some activities would be taken over by robots, resulting in changes in jobs and skills requirements for us humans. If one does not respond to these changes – they would be left behind.

MSME energy efficiency is essential in certain sectors, such as the ceramics industry, which utilizes higher energy, amounting to over 50% of the total cost of the product. In such cases lowering the energy costs make huge economic sense. UNIDO has been involved in energy awareness raising for such industries. This means not just saving, where one feels good about it, but is actually saving energy and thereby contributing to the profit margin. Energy efficiency has huge economic benefits and therefor a sound economic perspective is essential when embracing the concept.

And as for alternate energy for MSMEs, UNIDO first recommends energy efficiency before moving onto alternate energy. Rationale is that it makes no sense to generate renewable energy if the business is not utilizing it efficiently in the first place. Hence, energy efficiency should fundamentally come first.

While investing in Renewable Energy (RE) is the way forward, the policy regime will have a direct bearing on investment decision. Another argument is that RE can be expensive, but there are ways of combining different technologies depending on finance agreements. For example, if the purchase agreements go for a long period, then RE service contracts can be included – if the scale justifies. Sri Lanka is a member of the International Solar Alliance. As such, it would be a good opportunity for Sri Lanka to promote solar energy and best practices and create an investment climate for solar power, which can bring back big dividends if approached the right way. International investors could also be potentially interested in such RE projects.



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The heart-friendly health minister

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Dr. Ramesh Pathirana

by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka

When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.

Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.

Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.

Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.

The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.

This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.

Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.

This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.

Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.

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A LOVING TRIBUTE TO JESUIT FR. ALOYSIUS PIERIS ON HIS 90th BIRTHDAY

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Fr. Aloysius Pieris, SJ was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera on Nov. 23, 2019.

by Fr. Emmanuel Fernando, OMI

Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.

It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.

Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.

Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.

Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.

Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.

Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.

Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.

In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.

Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.

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A fairy tale, success or debacle

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Ministers S. Iswaran and Malik Samarawickrama signing the joint statement to launch FTA negotiations. (Picture courtesy IPS)

Sri Lanka-Singapore Free Trade Agreement

By Gomi Senadhira
senadhiragomi@gmail.com

“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech

Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).

It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.

Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.

However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.

1. The revenue loss

During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.

The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”

I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.

As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!

Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”

If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.

Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.

Investment from Singapore

In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.

And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.

I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”

According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!

What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).

However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.

Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.

That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.

The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?

It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.

As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.

(The writer, a specialist and an activist on trade and development issues . )

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