Ceylon Today Editorial

Entrepreneurship

21 October 2016

Two factors came out of Development Strategies and International Trade Minister Malik Samarawickrama's speech at the inauguration of the 37th National Conference of Chartered Accountants organized by the Chartered Accountants of Sri Lanka (CA SL), a body that comes under the President, which took place at the BMICH on Wednesday (19 October).

Speaking of his own foray into entrepreneurship, the minister said that what made it possible was the creation of an enabling environment and of having banks willing to take a risk. What, however, was unsaid was the availability of trade deals that allowed this to happen.

He said that the enabling environment was created after J.R. Jayewardene opened up the economy in 1977, transforming Sri Lanka's commercial landscape, previously run in a closed economy environment, to that which was open for business with the rest of the world.

Samarawickrama said that at that time he was employed at Shaw Wallace and Hedges. He said that with the open economy, he found that there was an opening for him to enter the garment manufacturing and export trade.

However, at that time he was bereft of capital to start his own business. He approached Edgar Gunatunga, a doyen of banking, who was then at Eastern Bank (now known as Commercial Bank) for a loan. Gunatunga asked him, what he could give as collateral. Samarawickrama in reply had said that his 100 cc motor-bike valued at Rs 7,000.

Rs 7,000; big money at that time, was yet, probably insufficient to start a garment business, concerning requirements such as land and building, machinery and equipment, raw material and last but certainly not the least, people, needed to run a business of this nature.

Gunatunga however said, "I will give you funds, but don't let me down." And there was no looking back for Samarawickrama, who has built a successful garment export business under the name 'Hoodvian Group', since. Needless to say, in the interim, Samarawickrama would have paid his loan in full and thereby wouldn't have let Gunatunga down.

Therefore, the 'enabling environment' and a banker willing to take risks, made it possible for Samarawickrama to transform himself from being a hired hand to that of a successful entrepreneur. What the minister however left unsaid in this episode was 'markets'.

One may have entrepreneurship skills, buttressed by an 'enabling environment' and banks willing to take that risk, but if there are no markets, all is in vain.

Prior to 1977, Sri Lanka was a plantation economy, led by tea, rubber and coconut. Among the transformations that took place after 1977 were the entry of new products and services, replacing plantations, as the driver of the economy. One of those new products was garments.

Garment manufacture at that time was dominated by the economies of South-East (SE) and East Asia (EA). Their markets were the West, led by the USA and European Economic Commission (EEC), the forerunner to the current European Union.

The SE and East Asian economies were then shifting from low cost garments to the manufacture of high value products. With labour becoming more expensive in those economies, the opening up of Sri Lanka to the world was a 'win-win' situation for both the buyer and the manufacturer.

With the economic changes taking place in SE Asia and EA, garment manufacturers shifted their facilities to Sri Lanka. And with the Jayewardene Government's strong relationship with the West, it was able to obtain garment exports to the West on a quota (since abolished) basis, which helped the likes of Samarawickrama's Hoodvian Group to enter those markets.

If there were no quotas to the West, that would have been the end of the minister's dream of end-up at least being a garment exporter, catering to the wide world outside.

If the East-West divide prevailing then was exploited successfully by Jayewardene to enter the markets of the West, after nearly 40 years that have passed since, Sri Lanka not only needs new trade deals and the regaining of lost deals such as GSP+ to once more rekindle the spirit of entrepreneurship among its peoples as well as exports, but also new products and services to offer to the rest of the world.

If the 'enabling environment' was created by Jayewardene for the garment industry to thrive, former Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal, a previous CA SL President, also seemingly tried to create a similar environment during the Mahinda Rajapaksa regime. At Wednesday's function, CA SL feted its former presidents. However, a conspicuous absentee at this occasion was Cabraal, who said that he's unavailable.