While the Government plans to unite the country’s disparate dedicated economic centres under a single State entity, stakeholders have expressed reservations, noting practical shortcomings.
In June, the Cabinet approved the proposal made by the Minister of Trade, Commerce, Food Security, and Co-operative Development to establish a limited liability company to develop, expand, and manage the dedicated economic centres.
It noted that there was a need to establish a centralised, legally acceptable, and accountable institutional arrangement to carry out business activities in these dedicated economic centres viably and sustainably.
Nevertheless, traders and economists have expressed scepticism regarding this proposition, arguing that while reform is necessary, centralisation in its current form may not be the best solution.
Traders’ perspective
Traders at the economic centre have been notably against this move. Speaking to The Sunday Morning, former Secretary of the Dambulla Dedicated Economic Centre Trade Association I.G. Wijenanda, who is currently a member of the committee, expressed strong opposition to the establishment of such a company, urging the Government not to destroy existing functional systems while embracing as yet untested and potentially damaging systems.
“The question is, why are they attempting to establish such a company when we have a good system in place now? Each economic centre currently functions independently. Why would they bring these together and establish a State company? Our position is that they should give more power to the management trusts and increase State administration.”
Similarly, Keppetipola Economic Centre Trade Association Adviser S.A.R. Bandusena rejected any allegations of impropriety levelled by the Trade Minister regarding the functioning of economic centres, expressing strong opposition to the Government’s proposal. “What we ask is that we be allowed to function under the existing mechanism without interference,” he said.
Manning Market and All-Island Economic Centre Association Treasurer Nimal Attanayake shared that the Government had not informed the economic centres of the reason or the potential benefits of this proposal, stating that they had filed a case against the proposal. “Our biggest problem is why the Government wants to undertake this,” he said.
Should the Government continue this course of action in an arbitrary manner, he said that all economic centres would launch a massive movement against it.
Aruna Shantha Hettiarachchi of the All-Island Economic Centre Association similarly pointed out that economic centres had more prominent longstanding unresolved problems that needed to be resolved, such as traders’ lack of deeds and obstacles to conducting business. “No economic centre is in favour of this course of action,” he asserted.
At present, Sri Lanka has 18 dedicated economic centres to provide the necessary market infrastructure to sell, buy, store, and distribute farm or agricultural products. Out of these, 14 economic centres, other than Vavuniya, Kilinochchi, Jaffna, and Batticaloa, are currently in operation.
These dedicated economic centres are managed by a management trust headed by the district secretary of the relevant district, composed of ex-officio members from Government institutions and traders’ associations.
Wijenanda stressed that these management trusts functioned appropriately, noting that should a company be established, its board of directors would have no insight into the requirements of farmers and traders.
Pointing to the example of the Mahapola Higher Education Scholarship Trust Fund, which he described as having ultimately been used for other ends despite having been established out of the best of intentions, he said: “We are certain nothing [negative] will happen under this Government if this company is established. However, we don’t know what will happen under future governments. The Government is not working with the future in mind.”
He also refuted the possibility of this mechanism enabling lower food prices, saying: “The Government’s control price is decided based on the demand and supply of products. Should supply decline, would a company be able to reduce prices of vegetables? Instead, the Government should be taking steps to increase production.”
An economist’s view
Speaking to The Sunday Morning, University of Peradeniya Department of Agricultural Economics and Business Management Senior Lecturer Dr. P. Weligamage, an agricultural economist, noted that while ideally there should be some sort of central mechanism, it should not be to govern or manage the process, but in order to facilitate transactions or in order to generate transactions from decentralised centres.
Pointing out that the exact form of this proposed company was not yet clear, he noted that a limited liability company would theoretically be a good way of securing capital, especially given the cash-strapped nature of the Government.
However, he posited that the optimal form of Government intervention in this process would be through something similar to India’s e-National Agriculture Market (e-NAM), which he described as a global example that Sri Lanka could follow. Such a solution would involve an online platform that would streamline the supply chain by allowing people to bid for produce online.
Dr. Weligamage therefore suggested that the State could participate in a venture that would promote interaction, in the form of a market platform, where farmers or farmer groups could participate as sellers while wholesalers/retailers, depending on their demand, could engage in the system.
Accordingly, he highlighted that information was the crucial aspect in this system, with the Government’s role being to promote businesses, facilitate interactions between them, and then engage in capacity building of participants through this platform.
“The Government can support the traders by promoting information dissemination, which it currently does only with regard to prices.
“Although a farmer knows the going price of produce in an economic centre, the process does not connect individual farmers or farmer groups in a broader platform. This should be done by the Government, but not in terms of controlling such activities, because the market will work regardless.
“Rather, the Government’s role should be to facilitate. It should facilitate interaction and promote the capacity of different farmers and their organisations so that they have a competitive edge in the market,” he said.
Dr. Weligamage also pointed out the need for investment in logistics such as transportation facilities and storage to minimise post-harvest losses of farmers.
Govt. response
Speaking in Parliament last month, Trade, Commerce, Food Security, and Co-operative Development Minister Wasantha Samarasinghe defended the proposal, pointing out that the existing economic centres had strayed from their intended purposes, adding that they needed a proper mechanism for management.
When Opposition Leader Sajith Premadasa, speaking in Parliament on Wednesday (23), mentioned the contentions raised by traders and farmers at economic centres against the proposal, Samarasinghe further clarified the Government’s stance, charging that of the 14 operational economic centres, some were operating as retail stores rather than as economic centres.
“Apart from the centres at Dambulla, Thambuttegama, Keppetipola, and Nuwara Eliya, the other economic centres are dependent on the bigger centres. Therefore, this mechanism is inefficient,” he said, alleging that some traders within the centres had no lease agreement. Accordingly, he stressed that the proposal was intended to safeguard these traders as well.
Pointing to the prevailing shortages that were unaddressed by the current system, he told The Sunday Morning: “Currently, we have no idea about the quantity of vegetables being sold in the country or the extent of the harvest, and there is no mechanism to purchase various imported products.”
Noting that they had received Cabinet approval to formalise the current process of the economic centres, he said: “These centres need a mechanism for management, since these 14 centres operate in different ways. While the State has invested in them, it has not received any revenue in return. The trusts spend the money, so the Treasury hasn’t even received the sum it expended on them.”
According to him, given the shortcomings in the current process, where things are not operating based on a common consensus, the plan is to bring all economic centres under a single State entity.
The Minister said that this plan would address issues such as deficiencies in transport, which currently fuelled delays and high prices. Samarasinghe further told The Sunday Morning that the company had already been formed, with directors remaining to be appointed, adding that work would commence soon. He asserted that the expectation was to control prices through this mechanism.
“A sum of nearly Rs. 1,100 million has been invested in establishing these centres, but the Treasury has not even received one rupee of this. There are centres that are being run well in addition to ones that have operational issues. We will therefore be establishing this company with the aim of ensuring that these economic centres are managed optimally, considering both fiscal management as well as food security. This will be a fully State-owned company,” he said.
“These centres have functioned for about 20 years in an irregular manner,” the Minister further noted, pointing out that many functioned according to the wishes of traders instead of the State. “They should be used for the objectives of the Government, while traders undertake the business aspect. Therefore, this company will be established to ensure that the Government’s economic objectives are borne out.”