‘Why should SMEs suffer due to bad decisions of politicians?’
- SJB champions their cause while Industries Minister assures Govt. will do all it can to develop sector
By Sandun Jayawardana
The need to find solutions to issues faced by Small and Medium Scale Enterprises (SMEs) owing to the country’s economic crisis was discussed at length in Parliament following an adjournment motion moved by the main opposition Samagi Jana Balawegaya (SJB).
The sector first came into crisis during the COVID pandemic but just as it was getting back on its feet, it was further hit by the effects of wrong decisions taken by the former government, SJB MP Dr. Harsha De Silva said, moving the adjournment motion on Wednesday (7). The industrial sector’s growth consequently fell by 16 per cent in 2022 compared to the previous year. When speaking of SMEs, Parliament must also focus its attention on Micro Small and Medium Scale Enterprises (MSMEs), Dr De Silva added. “About 80 per cent of our businesses are MSMEs. According to figures from the Central Bank and the Ministry of Industries, they account for 52 per cent of our Gross Domestic Product (GDP). About 45 per cent of jobs are in this sector.”
It does not appear that the government is prepared to resolve the issues faced by these enterprises, the MP observed. He said banks were inconsiderately applying ‘parate execution’ on mortgaged properties belonging to these entrepreneurs who had been hit by an economic crisis that was not of their making. Parate execution allows a licensed commercial bank to sell a mortgaged property that had been secured to the bank as collateral without going through court proceedings. Over 400 such properties have been gazetted and taken over between January and April this year alone, he added.
Dr De Silva called for Parliament to enact laws similar to Chapter 11 Bankruptcy laws in the US, which allows any business, whether big or small to declare bankruptcy in a court of law and request their creditors to restructure their debt. “It is grossly unfair that while we as a country can ask our creditors to restructure our debt, there is no legal avenue for these MSME owners to ask banks to restructure their debt. The country fell into crisis due to the decisions of politicians, so why should they suffer as a result?”
SME entrepreneurs in Sri Lanka were receiving step-motherly treatment, said Opposition Leader Sajith Premadasa. He called for a temporary halt on the enactment of all parate executions until the economy stablised. He said the 30-year law on parate executions should be amended to suit the present-day situation.
Mr Premadasa also drew the House’s attention at the way vehicles of SME entrepreneurs were being seized mercilessly and illegally by finance companies and called for a halt to the practice.
While acknowledging that the government failed to predict the extent of the economic crisis that would befall the country owing to the COVID pandemic, it was determined to do all it can to develop the SME sector, Industries Minister Dr. Ramesh Pathirana told Parliament.
SME entrepreneurs in Sri Lanka faced three main obstacles, namely liquidity, problems surrounding land and difficulty in obtaining licenses for their businesses, the minister explained. He pointed out that President Ranil Wickremesinghe has appointed a Select Committee headed by MP Madura Withanage to improve ease of doing business. This Committee will discuss all three of these obstacles and recommend ways to resolve them.
The Finance and Justice Ministries are also in discussions about the possibility of amending the parate law, at least to give a short-term moratorium on their execution, he further said.
SME entrepreneurs are the backbone of the country’s economy, said State Minister of Finance Ranjith Siyambalapitiya. There are practical difficulties however, in immediately solving all their problems. Commercial banks too are facing serious problems of their own, he asserted. “We couldn’t take out loans from foreign creditors, so we turned to commercial banks. They had to provide large scale loans for us. There was also an increase in debt moratoriums, while transactions came down. The banks have to maintain their liquidity and that is why the parate law is there.”
If the banks fail to maintain their liquidity and collapse, the result would be catastrophic across all sectors, the state minister warned. The government must always keep that in mind. This did not mean it will turn a deaf ear to the cries of SME entrepreneurs, insisted Mr Siyambalapitiya, adding that it is already looking into resolving their issues in a responsible manner.
If the country’s economy is to be safeguarded, all sectors including SMEs must be in a position to restart their engines once the economy stabilises, said National People’s Power (NPP) Leader Anura Kumara Dissanayake. “But when we consider the problems they are faced with, they will not be able to begin from where they were before the crisis.”
If for example, a person working in the tourism industry has his vehicle, used to transport tourists, seized by a finance company due to late payment of the lease, how can he restart his business? Mr Dissanayake asked, insisting that action must be taken to prevent the seizure of such vehicles illegally through thuggery. He pointed out that former President Gotabaya Rajapaksa had earlier imposed a prohibition on seizing such vehicles for a six month period. As such, it is not a difficult thing to do.
What lawmakers are facing now is not an issue related to long-term economic plans related to the industry, but matters facing local SME entrepreneurs that require immediate solutions, he further said.
Parliament reconvenes at 9.30am on June 20.