Cooperative system to rejuvenate Northern economy | Sunday Observer

Cooperative system to rejuvenate Northern economy

Minister Mangala Samaraweera heartily greets a customer at the Co-op shop  Pix: Rukmal Gamage
Minister Mangala Samaraweera heartily greets a customer at the Co-op shop. Pix: Rukmal Gamage

With the Rajapaksa regime’s flawed development policies post-war, aimed at credit expansion and self-employment pushing people into crippling indebtedness and abject poverty, the Government rolls out a plan to invest Rs. 1 billion in producer co-operatives across the Northern Province as part of a drive to address the rural economic crisis

With widespread indebtedness in the Northern Province crippling the rural regions and existing reconstruction initiatives bearing little fruit, the government is now looking at a fresh development strategy to resuscitate the Northern economy, The Sunday Observer learns.

According to plans mooted by the Finance Ministry, the government intends to support community-based co-operative sector by investing in fifty small industries run by over 1,900 regional co-operative movements, in a major bid to spur sustainable and inclusive reconstruction, while generating employment for over 2,500 people.

“The cooperative movement in the North is very much a sleeping giant and one of the main economic pillars here. This is the main reason the government decided to help you by investing a lot of money through the 2018 Budget,” Minister of Finance and Mass Media, Mangala Samaraweera told representatives of cooperative societies during his recent visit to the Northern Province.

The Government’s 2018 Budget unveiled in November last year allocated Rs. 1 billion to support, by way of grants, selected small industries throughout the war-affected region by empowering the vast network of cooperatives in the Province.

As none of the organized reconstruction efforts so far have tapped the century old tradition of successful producer, consumer and credit cooperatives in the region disrupted by the civil war, regional economic analysts believe, the existing set of numerous institutions under the cooperative movement - consisting of around 409,000 members from the population of 1.1 million in the region – is in fact capable of triggering socially, economically and environmentally responsible growth, upon infusion of capital and 21st century modern technology.

Addressing a well-attended meeting with the Cooperative Council representing 50 producer cooperative industries and women’s groups in Jaffna, Finance Minister Samaraweera informed participants that the government has devised a mechanism to tackle the prevailing indebtedness in the region.

“We are well aware of the problem of indebtedness with many females also committing suicide. So, that is one of the reasons that we had many discussions subsequent to the Budget with the Central Bank and Treasury officials and we have come up with proposals to tackle these issues,” the Minister said at the meeting held at the Jaffna District Secretariat.

Minister Samaraweera was accompanied by the Governor of the Central Bank of Sri Lanka, Dr. Indrajit Coomaraswamy, Secretary to the Treasury, Dr. R H S Samarathunga, Deputy Secretary to the Treasury, A.R. Desapriya and Director General of the Department of Development Finance at the Ministry of Finance, A.M.P.M.B. Athapattu.

Indebtedness

According to economists like Dr. Ahilan Kadirgamar, the previous government’s development agenda after May 2009 which focused on infrastructure build-out, financialisation and expansion of credit, has now led to an even deeper economic crisis, primarily because the challenges of reintegrating a war-torn society were not recognized. He observes that there is crippling poverty in some of the northern districts with poverty head counts in Kilinochchi and Mullaitivu now standing at a sharp 18.2% and 12.7%, respectively.

“Expecting credit to stimulate self-employment had disastrous consequences. The northern population has depleted its assets with indebtedness and its social institutions have deteriorated due to lack of social investment,” says Dr. Kadirgamar.

Explaining further, he points out that the situation of women, both war widows and single women, who carry the double burden of earning an income and caring for children and elders, is particularly precarious. At the end of the war, nearly 28% of the families of Mullaitivu and Kilinochchi Districts were headed by widows, single mothers or separated women.

Meanwhile, fielding questions over how indebtedness in the Northern region is expected to be tackled, Governor CBSL, Dr. Indrajit Coomaraswamy said, a six month moratorium on all loans of Rs.50, 000 and below, obtained by residents in the Northern Province from all licensed financial institutions has been granted. The purpose of the six months moratorium - a legal authorization to debtors to postpone payment is to create space for the various programs being initiated through Budget 2018, such as, the ‘Enterprise Sri Lanka’ Loan schemes, to create livelihoods and income streams resulting in sustainable outcomes for the victims of high debt.

“The reason we can’t allow this moratorium for more than six months is because if a loan is not serviced for more than six months, it automatically gets classified as a non-performing loan which affects the Balance Sheets of the banks and finance companies,” the Governor explained.

He added that another initiative to tackle indebtedness entails the creation of a help desk in the Regional Office of the Central Bank of Sri Lanka and help desks in each of the District Secretariats of the Northern Province. These help desks receiving customer complaints from the public about unethical practices by banks and financial institutions in the region - such as, undue harassment at the time of recoveries - will assist victims by bringing issues to the attention of the authorities.

Significance of cooperative movements

In tackling the current predicament, cooperative group representatives who attended the meeting with the Finance Minister highlighted that revitalizing the northern economy through small industries will not only improve local livelihoods but also benefit the national economy due to its export potential.

They point out that although for decades prior to the war, co-operatives were thriving and were important institutions for rural development, the country’s thirty year conflict however disrupted and dismantled many of these institutions.

“After the war, many of these co-operatives have managed to revive their activities but production, including by small industries continue to stagnate in the North due to the lack of capital investment,” they noted.

Meanwhile, Secretary to the Jaffna District Cooperative Council, Vethawalli Selvaratnam expressing her opinion on the government interventions said, the Council is happy to learn that cooperatives are regaining their desired attention from high ranking officials of the present government.

“This is the first time, since the end of the war, we were able to interact face to face with a high profile Minister in the central government and bring our issues to his attention. What we grasped from the Minister’s speech is that they are serious in helping us which is a very welcome situation,” Selvaratnam told the Sunday Observer, last week.

She said, the cooperatives while calling out for greater assistance for females have appraised senior officials of the key challenges being faced by the community ranging from indebtedness to unemployment. She explained that the people were reeling from an economic crisis as microfinance institutions had issued predatory loans at exorbitant interest rates.

“This region has potential to modernize and expand existing small industries such as, palmyrah, bottling factories for products such as toddy, jaggery, fruits and jam. We would also like the reactivation of closed industries and explore new projects through allocations from the Budget,” the Cooperative Council Secretary said. She added that given the Budget allocation, the ball has now been thrown into their court to identify potential investment sectors, and hence, they are now in the process of coming up with proposals through extensive discussions with relevant stakeholders.

Implementation progress

Speaking on the progress of the implementation of the proposed project, a Finance Ministry official said, a series of meetings have already been held with key stakeholders to create awareness and buy-in to the program.

Accordingly, potential avenues or sectors identified for investments during initial discussions were on ice plants and cooler vehicles for fisheries, canned fish production, food processing and juice production, rice storage and milling by Multi-Purpose Cooperative Society, palmyrah food and drink products, women’s semi-industrial food production centres and Women’s Child Care and Elders’ Care Centres.

On the other hand, issues raised include the need to produce development plans for the co-operative sector at the provincial and district levels for each key industry such as fisheries, palmyrah etc, seek expertise to identify and approve appropriate technology to modernize production processes and to increase sharing of resources (knowledge, skills and infrastructure) among individual societies to develop effective internal value chains.

“As this proposed program is provincial in scope, significant preparatory work is required to ensure that the process of selecting industries to invest in is inclusive and participatory, but also importantly, that the allocation is strategically distributed across the five northern districts to achieve maximum production and job creation where most needed,” Dr. Kadirgamar highlighted.

According to informed sources, stakeholders who participated at the meetings included, Provincial Commissioner for Co-operative Development, Central Bank of Sri Lanka officials from the Kilinochchi Regional Office, Assistant Commissioners of Co-operative Development in each district, district co-operative councils, and leaders and General Managers of individual co-operative societies.

“Through the district co-operative councils, grassroots level meetings are also taking place with the membership of societies as a means of spurring interest, investment ideas and activity, while monthly provincial level co-ordination meetings have been established,” a high ranking official from the Finance Ministry elaborated. 

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