Financial Times

There were two contrasting annual reports recently from Sri Lanka’s biggest listed companies – Hayleys and John Keells.

While Hayleys reported lower profits, John Keells announced an excellent year. But Hayleys had a reason for the fall in profits

It’s rare that Hayleys, which has a reputation for being the world’s best producer of activated carbon, goes to the press to raise an issue that will catch the government’s attention or the eye of policy makers. In this case they did.

Why? Because in Hayleys chairman Rajan Yatawara’s own words: “we just couldn’t get the attention of (the politicians, policymakers or those that mattered).”

While a lot of the issues and problems relating to inconsistent policies, delayed refunds, problems with investing abroad and getting the wrong foreign investment here have been raised, the group – frustrated by no action being taken by the authorities - also thought it fit to reiterate these issues in an interview with The Sunday Times FT (See our story on the earlier page). “These are issues that concern everyone in the industry and the private sector; not only us,” noted Yatawara.

What is Hayleys’ biggest problem? The company is the world’s largest producer of activated carbon and possesses the best technology for it: something that Sri Lanka should be proud of.

Instead what does the BOI do? Encourage at least three companies with foreign investment to set up shop in the same sector, a sector that is short of raw material and a sector where we don’t need foreign technology or know-how (isn’t that one of the reasons to attract foreign investment anyway?). Hayleys has the best technology in the world in this industry so much so that some ex-Hayleys employees have helped set up a few activated carbon plants in other parts of Asia. The company brings in foreign exchange; it is exporting technology, a rare feat for a Sri Lankan company and does many things that the country – I repeat – should be proud of. Instead it’s being forced to compete with some odd foreign investors who claim to have new technology.

To protect their interests and world class technology, Hayleys has taken the legal route to stall any further bid to ruin their industry. “The government approves a foreign owned company which doesn’t bring in foreign cash but borrows heavily from local banks who provide them facilities that even we don’t get (like rescheduling of debts). We pay all our debts; we bring all the foreign exchange back but we make less profits than they do,” said Hayleys Chairman Rajan Yatawara.

In 1990, the BOI approved another carbon plant whose investors claimed to bring different technology and sell only to China. That never happened. The machines were also faulty and they were exporting to the same markets as Hayleys. Subsequently the firm went bust but not before the foreign investors had taken their money away.

“We have evidence to show that price undercutting by these foreign firms is taking place. They pay higher prices on a short supply. We are been forced to run at a loss in the past 2-3 years to service our customers,” he said.

Hayleys’ biggest concern is the belief that there could be an international conspiracy to kill the technology that the local firm has perfected and accepted across the world as the best. “It could be some international competitor trying to take over markets; I don’t know. But there seems to be a strategy,” he said and implied that our authorities may be unwittingly falling for this. He cited a case where a month before their factory was hit by a month-long strike, another international buyer asked a Hayleys partner overseas whether he had heard that there was a strike on at the factory.

“There was no strike then but one month later it happened. Was this buyer tipped in advance? How did he know,” Yatawara said, adding that this incident reinforced their view that there was some conspiracy to kill local industry.

Companies like Hayleys, that’s showing the world what Sri Lankans are capable of, need to be protected and encouraged. We hope this catches the attention of President Mahinda Rajapaksa who has a feel for local industry and technology.