A pioneer apparel industrialist said the rupee is highly over valued due to a strange mixture of ill-advised policies which has the whole economy of the country in a mess. "Inflation, at about 30 percent (28.2 percent), and bank interest rates, varying from 23 percent to 36 percent, is at record levels and the rupee has been made to appreciate about Rs. 7 to the US Dollar!" K. C. Vignarajah, said. The former President of the Ceylon National Chamber of Industries, Vignarajah, who is now a consultant for the apparel sector, said that countries where the economies depend on exports, value addition industries and services, fought to have undervalued currencies. He said that the Tiger Economies of the South Asian Region and Japan sought undervalued currencies. Even China after accumulating mountains of reserves, and under tremendous international pressure, only recently undervalued their currency. Ideally the exchange rate should be so geared that it becomes a rectifier of the trade balance in order to make industries and services competitive. The artificially appreciated rupee is the result of a distorted version of a floating exchange rate which augments the dollar supply through borrowings. "This is detrimental to the manufacturing, services and value added export, and import substitution sectors providing the bulk of the country’s employment," he said. "Taking into account the very high inflation and interest rates when compared to our competitors in the region, as well as those of our export markets, the propped up rupee gravely deteriorates the export environment." The Dollar bonds and borrowings again go to prop up the rupee and crash export industries and services. "What will happen when the time comes to repay them? We will continue to depend on those many who have to go abroad and work like slaves, so that a few politicians, political appointees and others can enjoy the high life here and globally," Vignarajah reminds us. The excessive dollars in the form of foreign commercial borrowings, new T-Bills & Bonds, aid, grants and remittances should be diverted in large measure to segments like capital expenditure, foreign loan repayments and to build foreign reserves. This should be achieved without using them to artificially jack up the rupee, which should remain fore mostly a correct measure of exchange value to balance trade. He said the first flush of excessive foreign currency was after the Tsunami. "The situation was not handled properly and led to the worst kind of corruption in the system, and which for the wrong reasons appreciated the value of the Rupee, which in turn reduced the proceeds to exporters and manufactures." Despite already having GSP+ concessions, which is now under serious threat due to Government Human Rights abuses record, the macro economic policies that had been adopted had dire results. "About 200 garment factories closed down in the past two years alone and their workers, mostly women, had been compelled to seek employment as maids in the Middle East." In order to keep workers happy, employers must be given the correct value for their exports. But this not being the case it had been necessary for workers to seek employment abroad, often in competing industries, thus strengthening our competitor countries in worldwide garment industry. He claimed that some women had been recruited to garment factories in countries such as Egypt, Bangladesh and Vietnam. "These suffering women send back their toiled earnings which props up the rupee even further and the vicious cycle of uncompetitive industry goes on. This is also true with the blue and white collar workers who leave our shores for greener pastures." "Even the foreign exchange earned by our migrant workers is fritted away on unnecessary luxury goods." "The country needs to decide whether it wants its families intact, with the people employed in the country, productively and export their products, or export the women and create disharmony in families and bring forth a rotten culture." "The ironic fact is that the government is flamboyantly promoting the brains and skills drain by encouraging our professional and skilled workers to leave the country and even have dedicated ministries for this purpose," he said. The wealth of this country is the human talent in all our multi ethnic communities. "We should have realised this years ago, and provided the basics for a happy contented environment without any discrimination whatsoever." So what does this veteran suggest we do? "SMEs will have to form area clusters and work hard at compatibility, or they will have to merge to form larger entities and create common facilities in the most efficient manner," he suggests. He warned that the conglomerates and larger companies will have to fight the temptation to take over SME factories, or to monopolise the industry through subcontracting without continuance of orders to the SMEs. "It will otherwise lead to grievous social backlash. There has already been some heartburn in the case of SMEs," he said alluding to how many SME apparel factories depend on their bigger counterparts for orders. "We should enhance the abilities of the small and medium industries in the country so that there would be equitable economic development and a liberal democratic polity where workers down to executives could have a better life here," he said. |
