July 28, 2013, 8:00 pm


By Mario Andree


Sri Lankan exporters want the government to reapply for EU GSP+ trade concessions because it would reenergize the country's exports sector, help regain its competitive edge, recover lost ground and lead to exponential growth.


"A couple of weeks ago, the news media reported that the EU GSP+ was once again being considered. There was great excitement in the exporter community that at long last, the mantra for Sri Lankan exports would be tangible and the country would be able to regain its competitive edge and recover lost ground," Outgoing Chairperson of the Exporters' Association of Sri Lanka Ms. Dawn Austin said addressing the 16th AGM of the association last week.


"With a greater number of countries joining the EU, there are fewer emerging markets in Europe accessible for Sri Lanka. At the end of the day, the economically strong Asian countries are themselves not buyers of certain lines of products from Sri Lanka as they themselves sell the same skills and resources as we do and manufacture or produce the same items.


"Unfortunately, this excitement died like a damp squib when an announcement was made that the application for review of GSP+ was not in the pipeline. The benefits would have energized the export sector like no other incentive can ever achieve. This would be a dream come true for many sectors and if there is any possibility, I would urge the authorities to consider this facility as a special case which would, without a shadow of a doubt, result in exponential growth," Ms. Austin said.


The loss of GSP+ has seen the apparels export sector lose around US$ 750 million each year, she said.


The Sri Lanka Economics Association has warned that the country's exports are on a declining trend as a percentage of GDP, down from 33 percent in 2000 to 17 percent last year, and unless exports were given a boost, Sri Lanka could not achieve a higher sustainable economic growth rate and was at risk of falling into a debt trap. Fiscal and monetary policies have not helped the exports sector either.


Exporters also warned that high interest rates and energy costs were making it difficult for small and medium enterprises in the export sector to survive.


Ms. Austin highlighted the SME sector issues of funding and said that unless entrepreneurs were given the support and direction to grow, the country would have an unbalanced economy not to far down the line.


According to her, the current facilities and support to the SME sector was not sufficient for the country to raise its voice to say that Sri Lanka has a strong and vibrant SME sector.


She also said that the high energy cost, which has increased the cost of production, was lobbied to the relevant authorities, but the outcome was not satisfactory as experts explain the energy cost structure and predict lower tariffs in the coming years. "The rationale behind the future possible energy cost reduction was still unclear."


Labour is a major issue, she said. With more and more looking for blue and white collar jobs, a serious labour shortage is increasing in the agricultural sector, wage demands have increased with the shortage as the supply is poor and the per capita income improving.


She said that, while India is recorded to be Sri Lanka's largest trading partner, despite the FTA being in place, there are inexplicable and insidious non-tariff barriers implemented to dissuade Sri Lankan exporters from tapping into the vast Indian retail market.


According to her, with India being discouraging, and with greater number of countries joining the European Union, there are fewer emerging markets in Europe accessible for Sri Lanka. "At the end of the day economically strong Asian countries are themselves not buyers certain products as they themselves are producers of the same, she said.


Exporters' Association of Sri Lanka Chairman Rohan Daluwatte said the country needed to focus on the SME sector, as the major cooperates were able to finance their activities through international borrowings at lower interest rates.


He said, "Although the interest rates on deposits have come down, the prime lending rates remain relatively unchanged, which is hurting the SME sector. The disparity between the Rupee deposit rate and the lending rate has to be immediately addressed to keep the SME sector buoyant."


He highlighted that the Sri Lanka's expenditure on Research and Development was far below regional countries and said that over the years it had fallen as a percentage of the GDP to the current 0.11 per cent. "The government should take an initiative to encourage Research and Development with public private partnership."


Increased cost of fuel and energy was a major drawback for the country. Sri Lanka is one of the countries with a high electricity tariff which in turn increases the cost of production, and that is further increased by the high wage demand due to labour shortage and per capita income increasing.


He added that despite the country having signed several bilateral and multilateral trade agreements with many regional economies, the FTA were heavily underutilized. Further, many of the regional economies were producers of the same products as Sri Lanka making trading with them a major challenge.


The Chief Guest at the 16th Annual General Meeting of the Exporters Association of Sri Lanka, Chairman of a local blue Chip, Hayleys PLC, Mohan Pandithage, said that the country was losing out to many competitors in the region and called for fast action to improve export volumes.


According to him, many regional competitors were overtaking Sri Lanka in traditional exports and the country, in the near future, would not be able to compete in the global market place if it does not change its approach.


The global market place was paying high for value added branded products and Sri Lanka too should capitalize on the opportunity to grow its GDP at 08 per cent or more.


Pandithage said that the Hi-Tec Sri Lankan Exports currently is below -2 per cent of the total exports, a lucrative area Sri Lanka could look upon.


He said that while the country is also currently facing a labour shortage, it will face much difficult times with the per capita income and the wage demand increasing. He said it was time for companies to make novel approaches through value addition to address the shortcomings.


Speaking at the AGM, Export Development Board (EDB) Chairman Bandula Egodage said that despite five months of export decline this year, in the month of June the country managed to increase its exports.


He said that the EDB has carried out several promotional programmes in India, China and there were more activities planned. The EDB had also carried out market studies in some of the potential markets, including Brazil and South Africa.


He called for an open dialog and asked the exporter community to discuss matters, with the Export Development Board, pertaining to the industry. He said that the EDB would listen to all the issues and try to solve what it could.


He said "I don't want to give false promises, bring your issues to the notice of the EDB, we will listen and solve issues we can, immediately and some over time, but we can't solve everything."


He said a discussion between both, the EDB and the industry, was crucial to solve matters pertaining to the industry. "If the industry does not bring the issues to the table we cannot even solve what the authority could, so lobby all your problems and let's try to find solutions."


Further, he said that the industry should not look towards the EDB to increase export volumes, but find avenues to improve trade, keeping in mind that the EDB was only a facilitator.


The EDB is focusing on branding as a strategy, he said adding that it would increase the popularity of Sri Lankan products and services to enhance export earnings which were close to US$ 10 billion at present.