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High unemployment

2014 Oct 13

By Zahrah Imtiaz


The Northern Province has also had one of the highest budgetary allocations since 2009. In 2011, the budget allocated Rs 12,496 million in 2012, the Uthuru Wasanthaya programme was given Rs 8,307 million and in 2013, the government allocated Rs 8,000 million for development in the North and East.
 

The lion's share of development work has also been carried out by India with their main project, the Indian Housing Scheme promising to build 50,000 houses at a cost of US$ 270 million. The houses are to be finished by the end of 2015. The Indian Government, which signed a bilateral agreement with the Sri Lankan Government to support Northern development pledged to provide Rs 16,175.9 million in 2015 after which the grant period will come to an end.
 

The Northern Province, thus, has no shortage of money; it keeps rolling in from every direction. A minor diversion away from the A9 however, tells a different story. The interior of Kilinochchi is filled with temples, churches, Indian housing scheme houses, broken roads and a smell of desperation. Many of the villages only received electricity a month ago, while many more remain in darkness. Most of the work is carried out by International NGOs in the area. In Jaffna, boys ride to school in new bicycles donated by an NGO, carrying their brand new UNICEF school bag. Such a sight is not uncommon in the region.
In this backdrop, President Mahinda Rajapaksa, will visit Jaffna on 13 October to meet various stakeholders in the region, to discuss the development of the North, five years after the war. The President's visit will accompany that of the much awaited Yal Devi, which will be officially declared open to the public on the day.
 

Scared to invest
"There is no issue with the investment climate here, but people are a little scared to invest here," said, Senior Deputy Director of the Jaffna Regional Office of the Board of Investment (BOI), A.R. Jeyamanon, as he sat back to explain the challenges faced by his office.
The regional office was opened in 2010 as part of the Uthuru Vasanthaya programme to promote investments in the five Districts of Killinochchi, Vavuniya, Mannar, Jaffna and Mullaitivu and it has been an uphill task for the Deputy Director to convince people to bring their money to the North.
"Our main issue is to encourage investors to start businesses here to solve the high rate of unemployment in the region" said Jeyamanon.
 

With such high rates of unemployment, the BOI Jaffna has done what the South did in the late 80s; it brought garment factories to the people.
"Since 2010, we have worked hard to get Southern companies to come here and have now managed to get four big companies to start seven garment factories in the North" he proudly declared.
In Kilinochchi, MAS has started two garment factories, which will provide 1,750 jobs in total. In Vavuniya, Omega Line has established a US$ 30 million project, which plans to employ 1,200 people. The Hidramani Group too has started a garment factory in Vavuniya to employ 1,000 workers and plans are afloat to start another factory in Mullaitivu to employ 1,000 people. In Mannar, Timex and Fergusen have entered with two factories to provide 1,000 people with jobs.
 

In addition to the garment factories, the BOI has also approved of a wind mill power plant project in Palai. The two companies Joule Power and Beta Power will set up a 20Mw power plant at a total cost of Rs 6,000 million.
In terms of local investments, the BOI has approved a Rs 300 million hotel project by Jaffna Tilco Hotel. Local millionaire Thinukural Samy, has spent Rs 300 million on a private hospital for the people of Jaffna. Unfortunately, he is still to earn adequate returns as many in Jaffna prefer to go to the free government hospital.
 

Having given an exhaustive description of all of the investments the BOI has managed to attract in the last four years since its inception, Jeyamanon wearily said, "Thus far this is all we could get. It has been quite a challenge to get people to come here."
When Jeyamanon was asked why he had not approached the Tamil Diaspora for investments in the North, he said, "We need to first study whether the Diaspora really has the money to invest in large scale projects here. We are not sure if it is all talk or whether they really want to come back and invest here."
Though a large number of the northern population is based abroad, the Deputy Director questioned whether they were all financially secure enough to make investments in Sri Lanka.
 

"What kind of businesses are they involved in? Are they entrepreneurs? Do they run their own businesses? Are they interested in investing here?" asked Jeyamanon. "Not all who left are professionals or businessmen. Some are in the welfare system of those countries. Why would they want to leave all that and come back here?" he questioned.
He then summed up the unemployment crisis with, "We have jobs but no workers while we also have workers with no jobs."
Though the BOI keeps bringing in one garment factory after another, many in the North, especially those in Jaffna do not want to work in the garment factories. They prefer white collar jobs to that of a worker behind a sewing machine. The garment factories operate on the 65:35 ratio, where 65% are blue collar and 35% are white collar jobs.
While the Jaffna BOI office tries its best to provide employment to its people, the people themselves see no hope in the region. The youth have one dream, and that is to leave Jaffna as soon as possible.
 

Following a course
Lavarjan is 20 years old and is the Deputy Director's driver. Having not scored enough marks to enter university, Lavarjan now dreams of leaving to Germany. His uncle lives there and according to Lavarjan, life would be better there. In his free time, he is following a course in computer hardware but said he would switch to hospitality management if he were to move to Germany.
"The youth no longer have focus. They simply want to do what their neighbour does" stated Jeyamanon.
When Lavarjan was asked whether he was interested in starting his own business in Jaffna, he said, "No existing business here is making money, so why should I start one?"
 

Kaninthini is a 22-year-old intern at the BOI regional office in Jaffna, but she has a diploma in Tourism and Hospitality Management from the Advanced Training College. She too hopes to leave to England as she sees better opportunities there.
Elaborating more on her struggles here, she said, "I cannot work in hotels here, our culture here does not approve of women working in hotels. I tried to start my own photocopy shop in my village but it is difficult to obtain a loan from the bank with no collateral and guarantors."
Banks in Jaffna require the person to have two guarantors who are government servants to guarantee the loan. "No one trusts anyone to guarantee a loan anymore", interjected Jeyamanon.
 

With very little income being generated among the local populace, many have turned to financial institutions and the vicious cycle of installment payments. R. Jayasekaran is the President of the Chamber of Commerce Jaffna and runs his own motor spare parts business. He said the greatest problem in Jaffna at present was the presence of financial institutions which promoted loans and various financial schemes to the people. In addition to this, he said business had in the last two years greatly diminished.
"Soon after the war, many financial institutions came to Jaffna and started canvassing for various schemes. The people too bought into it and took loans to buy vehicles, electronic goods, jewellery and saris. None of these investments generated any income. They were lifestyle loans, which got a lot of people into unnecessary debt" explained Jayasekaran.
Many had also purchased tippers to be hired out for construction work, but no such work was available to them as most work was contracted out to Southern businessmen.
The Chamber of Commerce Jaffna is now involved in educating people about making the right investments and getting out of serious debt.
 

"The people in Jaffna always had money, even during the war. The financial position was not bad thanks to Diaspora money. But now we have to get businesses here working and that is hard," explained the Chamber of Commerce President.
High loan and temporary overdraft interest rates have restricted businesses from expanding or starting. Last year the temporary overdraft interest rate was between 29-30% while loan interest rates stood at 16-24%. Though the loan interest rates were brought down to 13% in the last six months, Jayasekaran said to have loan interest rates between 9-12% and temporary overdraft rates at 18% would help businesses greatly.
 

Helped us a lot
In the last 3-4 months however, businesses have picked up thanks to the festival season, which brought many in the diaspora to Jaffna. Jayasekaran estimated that at least 30-40,000 would have visited Jaffna and for the first time in a long time, they had made their purchases from Jaffna. "They usually buy their goods from Dubai, Singapore or India but this time they chose to buy from Jaffna and that has helped us a lot."
 

The Jaffna Chamber has a membership of around 1,000 traders and they have asked the government to provide their businesses with a soft loan scheme (at an interest rate between 3-4%) and adequate compensation to restart their businesses after the war.
"We lost everything due to the war. Many had their businesses and property completely destroyed, so how do you expect us to compete with businesses in the South? We are trying to make do now with our own effort and Diaspora money. It has been five years since the end of the war, and the government has done nothing to help us," lamented the Chamber President.
When the Chairman was asked about the new factories being set up in the North by the government, he said, "They do not need to build new factories, why cannot they simply restart the old ones? We had salterns, chemical, paper, tile and cement factories. Why are they still shut?"
 

A local businessman in the meantime revealed that many did not want to invest in the North given the uncertain political climate, "There is no permanent political solution given to the Tamil people. The Central Government and the Northern Provincial Council keep fighting with each. In such a climate, who would risk investing here?" he said.
 

The BOI regional office in Jaffna in the meantime is looking to bring in more investments in the IT and education sector as it feels that the people would be more willing to work in these sectors.
"An investor has built a luxury housing complex in Jaffna, so far not a single flat has been sold. No one is buying," said Jeyamanon as he wrapped up the meeting on the investment climate in Jaffna.

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