Managing business through Covid-19: From global to a local economy | Sunday Observer

Managing business through Covid-19: From global to a local economy

17 May, 2020

While the priority is get back to normal life, the process is not easy and will be time consuming.

This needs a national action plan for economic revival headed by a committee which should include the public and private sector with the armed services and police giving the strength and courage to resurrect our economy similar to what has been done to fight the pandemic.

Global and local economy:

All this time we were working on global policies which have now been disrupted. Imports and exports, global supply chains will be severely affected, foreign exchange scarcity will be severe and the exchange rate depreciation speeded up with many job losses and bankruptcies of business organisations.

Everyone expects the Government to assist or bail them out and the response has been good in the short term with the concessions granted to business and society but not a solution for the future without studying the Sri Lankan economy and how we can work out a new national strategy to take the country forward and to find solutions to problems encountered.

Already technology is playing a major role in communication, education and many other sectors. The lack of foreign exchange will mean that we may have to look at the policies we adopted prior to 1977 where local production and agriculture were priorities.

However, this should be handled with care and caution with the new experiences we gained through the opening of the economy promoting exports, free availability of foreign exchange, foreign direct investment, excessive borrowings of the government, negative terms of trade, free trade agreements, free availability of raw materials, food stuffs and many others which will be greatly diminished or not available now.

The gap in the continued balance of trade, the dependence on foreign employment income, major export of garments together with the major imports of fuel, foodstuffs, milk foods will have major impacts on the economy and society and needs to be vigorously pursued in framing the new strategies to transform the economy and look at local agriculture, and local industry as priorities to save the Nation.

The Governor of the Central Bank has requested all exporters to bring in the export proceeds and halted all non-essential imports. These are all indications that we need to frame our new economic policies on a majority local economy. Local banks and finance companies too will have to play a major role in assisting local businesses in these difficult times and the Central Bank has already outlined certain packages and the ultimate result should be to enable them to tide over these difficulties and come back to normality.

Priority for the agricultural sector

If you consider the local economy then the priority has to be given to the agricultural sector as we cannot be without food and to avoid hunger. Hence a dynamic national project committee should be formed with the government machinery going to the agricultural areas and draw up the plans to maintain food security and to decide what crops should be grown to substitute for food items that were imported which can be grown in Sri Lanka.

Many of the food items coming from India will not be available as they will need to feed their own people first. But all of them can be grown in Sri Lanka and we need to put the agricultural sector on a war-footing.

Technology and knowledge information should also be used in this new drive for excellence in the agricultural sector. Government officers have to put their best foot forward and come with practical and workable plans and policies with district project committees coordinated by a strong and result oriented main National Project Committee which need to be action oriented. We should make use of experienced professionals, government servants, technical officers, armed services and police similar to the National Committee formed to fight the COVID 19 pandemic which is an example as to how the Government can be effective and productive to reform the local agricultural sector, the biggest asset we have. We need to achieve this goal of self sufficiency in food items and go back to the era of King Parakrama Bahu when we earned the distinction of being the Granary of the East. 

Foreign Exchange scarcity

On the foreign exchange usage the biggest import items are fuel and foodstuffs. Since these items are imported we need to earn the foreign exchange needed for imports. In the case of fuel, our transport, electricity generation and industry needs should be properly planned to determine the minimum import of fuel based on the low availability of foreign exchange.

In the case of food stuffs we need to grow our own foodstuff and save the valuable foreign exchange going out.  Increasing the reliance on renewable energy will also reduce the usage of fuel for generating electricity.

We are not in a position to go for more foreign loans as this would mean that we will get further indebted and even portions of the country will have to be sold to foreigners to repay loans. This should be avoided as we have the capacity, professionals, technical and devoted citizens to develop like countries such as Singapore, Malaysia, Korea who were unseen and unheard at the time we obtained independence in 1948. We need honest ‘Can Do People’ with a love for the country who can contribute to develop Sri Lanka with a strong leadership.

We will also lose the foreign exchange earnings from the tourism and the garment sector and other exports to the European markets and USA which will be a big hit. The growing IT/BPM industry exports should also be closely monitored,developed and supported as a major export earner opening new opportunities to take Sri Lanka to the high tech era supported by the universities and the new IT colleges.

Therefore, we need to immediately cut the import of all goods that can be produced locally to save foreign exchange. Hence imports under FTA should not be permitted to harm local industries. 

Priority for local economy and industries

All local industries should be promoted and given due protection, financial assistance and tax incentives. All large businesses and industries should use the SME sector to make the SME sector successful and produce goods and services at competitive prices. Already some of the bigger companies, especially those in the retail trade are buying directly from farmers to give fresh vegetables and fruits to customers.

This concept of outsourced work is done on a big scale and used by foreign companies especially in the IT, BPO/BPM sector and India is a country that has greatly benefited. However, the foreign markets will be affected in the present context.

The Government needs to give high priority to technology by computerising all the government departments and ministries to improve the efficiencies and productivity and this work should be given to local experts and companies who can contribute to build our economy in this economic downturn. This strategy will also assist companies to use outsourced components, goods and services to be provided to make themselves competitive in the marketplace.

The Government could also implement the work from home concept which has been introduced recently with the problems encountered by undertaking computerisation. The government should also give incentives to all companies that go for the concept of using local outsourced goods and services.

This will also promote rural industries like how we set up the 200 garment factories project which enabled the garments sector to be the number one exporter from Sri Lanka. This sector is today  badly affected and the industry should be provided all assistance to stage a recovery as the largest foreign exchange earner.

With the prominence we plan to give the agricultural sector, the food-based industry, small, medium and large should be encouraged and given all support and incentives. We need to go with the slogan ‘Made in Sri Lanka’ and change our mentality from imported or foreign goods and services to locally manufactured goods and services. 

The plantation and agricultural exports too will be hit but may not be to the same extent of the garment and industrial exports. The plantation sector should be made more productive and cost competitive and modern techniques brought in to make them viable. All assistance should be given to this sector to retain the export markets. 

Restructuring of loss making State Corporation

All state corporations running at losses such as Ceylon Petroleum Corporation, Ceylon Electricity Board, Sri Lankan Airlines will need expert management to take them forward on a war-footing to make people work, increase productivity, make them profitable and make those in charge accountable and performance monitored on a regular basis.

The government will in no way be able to subsidise these State institutions and absorb the huge losses they are making especially at a time when we are in a dire economic situation.  Accountability needs to be brought in at all levels so that those given responsibility at all levels will be held accountable and responsible for their work performance and priority given to least cost production and services with productivity and value creation to face this grave threat facing the economy and society.

At present it is taken for granted that state corporations can run at losses but not after COVID 19 Pandemic which is pushing us to become beggars with such performances and government and society cannot tolerate such incompetencies and losses to destroy the economy and harm the people. This would be applicable to all state corporations and government institutions such as the railway and transport boards which are heavily subsidised. 

Education and use of technology

The education sector need to be restructured to immediately convert the rural schools to teach Science, Technology, Engineering, Maths (STEM) subjects without producing a large number of arts students passing the A/L and going into universities which have the largest number of undergraduates in the arts stream at entry and when passing out.

The introduction of STEM will enable Sri Lanka to become a technology hub producing useful graduates to develop the economy. Modern methods of learning using new technology such as e-learning, video lectures will give rural students the same facilities as those in urban areas, instead of the stock excuse that we do not have sufficient science teachers.

One cannot understand this excuse given over the past three decades when we have so many Advanced Level qualified students in the Science stream who can be recruited for graduate training with assured jobs to serve in difficult areas. Research and Development will be another important area which has to be covered in all sectors to enable new innovations and  developments to assist agriculture, industry, health and other sectors especially for boosting local industrial production and services and exports. 

It is essential to set up IT and English language colleges throughout the country as Public Private Partnership (PPP) initiatives so that opportunities are provided to all youth to study programmes which will provide job opportunities where the government can provide the course fees to students and the private sector and foreign investors can find the jobs.

Skill development in other sectors should also be given the highest priority as there is a great demand for those with skills in carpentry, masonry, electricians, technicians, plumbers, construction workers and others where there are many  vacancies and self - employment opportunities and to give them a recognized certificate which will enable them to obtain a good job and wage for their skills and expertise.

New work methodology and culture

We need to transform our economy, the local industry, agriculture, education, plantation industry, banking and finance, exports, business and commerce to meet the new challenges and drive it forwards. Considering the current strength given by the dedicated Medical Doctors, Nurses and other health staff with the assistance and strength provided by the armed services and the police has provided a New Work Methodology and Culture with the direction of the President and Prime Minister which one can say is very successful and result oriented and to work towards the elimination of the COVID 19 Pandemic.

This new work methodology could be used to set up the National Committees for the Development of the Economy Post COVID 19 Pandemic. The National Operation Centre for the Prevention of the Covid-19 Pandemic is a new innovative project committee which has been set up and a similar concept could be used to Managing Business through COVID 19 Pandemic to transform from Global to a Local Economy and is an opportunity we should not miss to make Sri Lanka the Granary of the East and dynamic business hub in the Indian Ocean. 

The writer is a Chartered and Management Accountant and former Chairman and Director General of the BOI and  Chairman, Peoples Bank