UNIDO to help Sri Lanka formulate industrial policy

Rene van Berkel (far right) was in Colombo to work on the UNIDO Country Program for 2020-2024. Source: UNIDO

ECONOMYNEXT- The United Nations Industrial Development Organization will help Sri Lanka to create an industrial policy to move into more innovative, higher value-added sectors, a top official said.

“Sri Lanka does not have a separate industrial policy,” UNIDO India Regional Office Representative Rene van Berkel said after consultative sessions for the next country program with Sri Lanka.

“All the policy that affects industry is made in the dark, on guesswork on how many firms we have, what sectors and what are the contributions, because just over 21,000 official industrial certificates have been issued,” he said.

“There’s many more industrial players here in Sri Lanka, so if you use that data for policymaking, you’re not doing the right policy.”

Past government policies have typically not been consistent, and there has not been a common framework to support multiple initiatives for different industries such as tea or coconut processing, van Berkel said.

The Sri Lankan Ministry of Industry and Supply Chain Management invited UNIDO to formulate the 2020-2024 country program and the government is keen to implement it, he said.

While the three earlier five-year country partnership programs were of smaller scale, the latest would be at a greater scale, but still would focus on a number of focal points which have yet to be decided.

“The effects would be limited if we go for a scatter gun approach and do a little bit here and a little bit there. So it’s better to be focused,” van Berkel said.

He said the new country program would emphasise setting up an evidence-based industrial policy, which would target sectors where Sri Lanka has the highest comparative advantage.

The new policy would enable enterprises to grow in the most promising sectors for Sri Lanka, and help reach the Sustainable Development Goal 9 on industrial innovation and infrastructure.

However, the UNIDO representative, who is a former professor on clean production at Australia’s Curtin University, said the policy document would not become a gamechanger for Sri Lanka if it is only published, like many other plans the country had made but not acted on.

He said the policy would require Sri Lanka to commit resources and institutional capacities to deliver on the plans.

The policy document would be preceded by a process to collect data on Sri Lanka’s industrial sector and ascertain the strengths and weaknesses of the country.

The main aim would be to move Sri Lanka from its dominance in low technology industries such as apparel (even if the industry has moved to wearable technology) to high technology manufacturing and engineering where the country could earn more, ven Berkel said.

At end-September 2019, industrial activity contributed 26.8 percent to Sri Lanka’s gross domestic product, with 27 percent of the labour force engaged in the sector.

However, van Berkel said once construction is removed from the equation, Sri Lanka’s manufacturing contribution has historically remained stable at 16 percent.

The Rajapaksa governments have tended to favour construction as the main driver of economic growth, which is a non-tradable sector, typically funded by debt.

Economists however have called for catalysing the tradable sector to boost exports.

Van Berkel said stable industrial contribution to GDP means that the sector’s growth has kept pace with economic growth, and Sri Lanka’s manufacturing has expanded faster than India, Nepal and Bangladesh.

“But we still have a lot of catching up to do if we want to be in the same league as Malaysia, Indonesia or China. We cannot immediately set up a heavy manufacturing base, but we need to start moving.”

Component manufacturing will be a starting point for more complex electronics, van Berkel said.

Even in agriculture, where Sri Lanka exports bulk raw material, processed goods would bring greater revenue, he said.

Agriculture, where wastage is high, material could be repurposed as well.

“We need to see where we already have strengths and where can we add more value, like using all of the banana tree.”

Fibre from the banana trunk as well as straw that usually goes to waste could be used to mill fabric, van Berkel said.

The UNIDO country program would also set up a base line for the environmental impact made by industries

“At the moment it is difficult to make environmental commitments to the industry sector beacuse there’s no base line.”

“Some companies are producing and publishing data, but for the sector as a whole, it’s difficult to get an estimate.”

“Under the energy and climate change component of the country program, we will attempt to build the baseline data on emissions and energy efficiency,” van Berkel said. (Colombo/Feb05/2020)