Financial Times

A substantial contribution
A report by the Ceylon Chamber of Commerce on the listed companies has made some interesting revelations about the contribution of the private sector to the country and serves to clear up some misconceptions among the people of what it calls a "much-maligned" section of our society.

It has revealed that over 60 percent of the value added by the private sector is distributed to the government in the form of taxation and to employees as emoluments. In sharp contrast, the report says, shareholders get only four percent of the value added by the private sector in the form of dividends.

As the chamber itself has said, these findings should disprove the myth that the country's private sector is only concerned about its "bottom line". While it is true that to survive in the hostile, competitive world of free market capitalism, companies have to maintain a sharp focus on the bottom line, the numbers revealed in the Ceylon Chamber survey puts their performance and role in a better perspective.

Of the 207 listed companies included in the study, 34 percent of the value added had been remitted to the government as taxes. This money is a significant contribution to the development of education, health, transport, infrastructure and other sectors in the country. The tax revenue from these companies represented almost a quarter of the total tax revenue of the government in 2002. This is no small figure. It indicates the potential contribution the corporate sector can make if it is allowed to thrive, given the right conditions.

After deducting other costs, only a balance of 14 percent of the value addition was left for the discretion of shareholders, of which over 70 percent, or 10 percent of the total value added, was re-invested in the companies for research and development, modernization and expansion. This money too helps create the necessary conditions for sustaining economic growth.

Among the companies studied, 27 percent of the value added went to employees as remuneration and retirement benefits. While this too is a significant contribution it would have been interesting to find out how much of the share that goes to employees as emoluments go to management executives and how much to the vast majority of ordinary workers.

It seems that executives in the corporate sector, at least in certain sectors, get almost First World salaries while workers get Third World rates. There has been much criticism over the scandalous disparities between the earnings of the top management and ordinary workers in developed countries such as the US.

There is undeniably a wide gap between the rates of pay for top executives and ordinary workers here. This is on top of the perks such as vehicles and entertainment allowances executives are entitled to. It is these inequities that partly fuels resentment among workers against corporate managements and leads to strikes and violence, and turn people against the private sector. And it is this resentment that politicians use successfully to turn into votes.

The effort by the chamber is commendable and the report is indeed timely given the advent of a left-leaning political alliance into power, in which a Marxist party, which has been sharply critical of, and hostile towards, the private sector, is a key member.

There are undoubtedly many misconceptions about the private sector. It is a pity that the misdeeds of a few, such as unfair treatment of labour and excessive profits, and the obscene conspicuous consumption of the super rich, should result in the whole corporate sector being tarred with the same brush. It is not so much that the private sector is making money but the manner in which that wealth is distributed that seems to arouse resentment.

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