The UNDP is facilitating partnerships between top Sri Lankan companies and local post-conflict communities aimed at providing fair equitable dividends within a profit oriented model.

John Keells, Hayleys and Ceylon Biscuits Limited are expected to enter into agreements with several communities in the East and North who have successfully formed into cooperative-style community-based organisations.

September...a big month...

"September is going to be a big month. We hope that several private sector companies, particularly Keells, Hayleys and Ceylon Biscuits will come forward to enter into agreements with communities in the East – and Jaffna in the North - who are already prepared to cater to the production needs of the companies in areas that have already been identified," UNDP Country Director for Sri Lanka, Douglas Keh, said.

"We have also made it possible for these companies to establish links with the local government authorities and government agents in order to facilitate a ‘business-friendly’ environment in these post-conflict regions," he told the Island Financial Review.

Not good enough...

There is no doubt the private sector has a key role to play in the development of the North and East, especially by establishing employment generating businesses in the agricultural, industrial and services sectors within the regions themselves.

There has been a resurgence of interest in the country’s business community to participate in the economic development of the East and eagerly wait for things to improve in the North.

However, to merely open up a factory or production centre, that would create much needed jobs, is not good enough.

The UNDP is working closely with the private sector, government authorities and the communities to push for a model it believes would work.

"Experience has shown that post-conflict recovery works best when businesses get involved on a for-profit basis. They no doubt have a responsibility to support the country’s recovery, but it should not be charity," Keh said.

He said businesses must be allowed to go for profits believing it is a better model when resources are allocated and makes business and employment generation sustainable.

"However, what we are insisting on is that the communities be given an equitable fair deal. This is where corporate social responsibility (CSR) comes in. CSR is not about building a school in a remote village and then leaving. It is all about doing ethical business.

"Sri Lanka’s private sector could provide a powerful engine for Sri Lanka’s recovery if they can somehow incorporate CSR elements into their strategic planning and market outreach, on a for-profit basis," Keh said.

"In other words, rather than expecting a 7 percent return on investment within 12 months, the companies would be ready to accept 6 percent in15 months, bearing in mind that the "suppliers" in this case may need some time to get up and running," he said.

"In the long run, as long as the resettled communities get a fair deal, this is the most sustainable model for private sector involvement in Sri Lanka’s recovery.

Similarly, the companies should be ready to invest more in training and capacity building of the resettled communities in areas such as cultivation, storage, and ideally, higher-value chain sectors such as food processing. It has to be borne in mind that these are not your typical agricultural suppliers. But over time, they will be," Keh said.

Keh said the key sectors that are immediately available with tremendous potential to reap economic gains for the communities—but need private sector participation to tap into markets—are the agriculture, fisheries, tourism and apparel sectors.

"The communities in the North and East have been suffering for decades. They don’t want to rely on international humanitarian support forever. They want to earn their own income. They want to be financially independent. They want to work. These sectors have the potential to provide the necessary employment that would help these communities rebuild themselves. Also, these sectors have a huge potential to grow," he said.

Keh believes that in future, today’s resettled communities will be ready for engagement with the private sector in other, more advanced industrial sectors as well. This will, however, need to be facilitated through developments in education and ICT.

"Building a strong knowledge base in these communities which would lift them to another level in terms of more advanced industrial sectors is crucial but the immediate requirement is to build on what they are now capable of producing. These communities should be able to stand on their own feet and re-establish their identities first. Then we can start to think of up-market production niches such as ICT, small, solar power generation, and communications. " Keh said.

Communication facilities are weak in these regions with many communities virtually cut off from the world.

"Sometimes people have asked me why they should send their children to school. This is because they are so isolated they are unaware of the opportunities," Keh said.

However, given the strong education base in these regions technologies could easily be introduced from the South. Small-scale power generation is another area that needs attention, including biogas production that uses the organic waste of households as the fuel for cooking.

In the agricultural sector, the Palmyra and Cashew industries have been indentified by the UNDP to hold promising potential as many Sri Lankan companies currently depend on imported products at high cost.

"Communities in the North and East are historically known for their expertise in the agricultural sector with many pockets of fertile land. Even the fisheries sector has room to boom after the government removed fishing restrictions," Keh said.

He said in the past few months, fishermen in Jaffna have seen a growth in their average income from Rs. 5,000 per month to Rs. 8,000.

"But this will soon go down as the market up there becomes saturated. It is essential that market links with the south be opened up further, sooner than later, so that this momentum does not flag. What these people need now is access to markets in the South, and this is where the private sector comes in," Keh said.

He said private sector firms would also need to establish direct distribution and collection links with these communities so that the ‘middle man’ is eventually eliminated thereby giving both parties more returns.

He said the UNDP was in the process of providing technical assistance to these communities in the areas of book keeping and basic training on how to run a business.

Keh also said the government and the private sector should also engage the regional business chambers in the North and East, getting them involved in the process.

"There must be sensitivity to northern communities’ widely-shared view that the "South" is trying to takeover. Ensuring that high returns go to the communities themselves will not only dispel this impression, but will generate a loyal base of labour into the future.

"The next year, in this light, will be crucial to setting the foundation for productive – and sustainable - business relationships," Keh said.

Sri Lanka: A role model

Douglas Keh believes Sri Lanka is placed in a unique situation quite different from other conflict or post-conflict countries in the world.

"Sri Lanka has always had a world-class, vibrant private sector despite the conflict. Now the conflict is over and we have on one hand post-conflict communities and on the other hand a strong private sector. Not many countries had or have this combination to such a degree.

"The end of the conflict has created so much positivism and the IMF loan has also given foreign investors confidence in investing in Sri Lanka. But it would be up to the world-class private sector of Sri Lanka to entrench a truly sustainable process of recovery that is driven not by international aid, nor even government good intentions, but rather by the ingenuity, resourcefulness, and flexibility of the private sector," Keh said.