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Govt. Cuts Export Target By 20%

Aug 28, 2010 3:10:20 PM - thesundayleader.lk

Rishard Bathiudeen

The Commerce Ministry has revised downwards its export target by 20% to US$ eight billion this year, up 12.7% over last year’s export figure of US$ 7.1 billion, but down 1.2% over the 2008 export figure of US$ 8.1 billion.
Previously the Ministry targeted a US$ 10 billion export figure for the year end.
Minister Rishard Bathiudeen speaking at a National Chamber of Exporters (NCE) organized event on Wednesday announced this revision, adding that export targets for 2015 and 2020 were US$ 15 billion and US$ 20 billion respectively.
Export earnings in the first five months of the year increased by 11.6% year on year to US$ 2,926.72 million and if prorated for the entire year, the island would end up with an export figure of US$ seven billion, US$ 100 million less than last year’s export figure of US$ 7.1 billion and down by US$ one billion over the Ministry’s new export target of US$ eight billion for the year. In contrast tiny Singapore’s annual export revenue is US$ 300 billion, said NCE Immediate Past President Rohan Fernando.
The loss of the GSP + concession alone is going to hit the garment industry by US$ 500 million, an official speaking on the grounds of anonymity told The Sunday Leader.
However, according to Joint Apparel Association Forum Secretary General Rohan Masakorala, such a loss would be only in the extreme case. The GSP + exposure is some US$ 300-500 million, he said.
In the event the buyer or the seller or both cut their margins, the magnitude of the loss may be either negated or minimized, said Masakorala.
The GSP + loss came on stream on August 15, due to the Government’s alleged human rights abuse in the prosecution of the LTTE war in its final stages and not replying or not providing a satisfactory response to this charge, according to the EU, the benefactor of this duty free concession. However, the door is yet open for the Government to renegotiate this facility.
Garments are Sri Lanka’s single biggest export earner. But lesser known sectors such as fisheries, ceramic and cable exports will also be impacted by the loss of the GSP+ facility.
Sarath De Silva, President, NCE, recently told reporters that among the constraining factors in driving exports were the lack of capacity and poor productivity. “Take tea, rubber or cinnamon, there is no excess capacity to export,” he said.
He told this reporter that a Hayleys subsidiary which manufactures gloves for export, plans to import rubber from India, as local production is insufficient to meet demand. similarly another of its subsidiaries involved in the activated carbon business which require coconut shells, plans to set-up operations in Indonesia because of a dearth of coconut shells here.
De Silva however said that the powerful Economic Development Ministry, functioning under the President’s brother Basil Rajapaksa, had recently made available 40,000 hectares of crown land on a 50 year lease to the private sector for development.
“This land cuts across all sectors, be it services (tourism), agriculture or manufacturing,” De Silva, a fruit and vegetable exporter, who himself is seeking 2,000 acres for his business, and was previously looking for land in Bangladesh for this purpose, said.
“It’s a powerful Ministry, previously we had to run to several establishments to get approvals, it’s a one stop shop,” he said.  As a result, De Silva expected agriculture exports, which contributes 16-18% to the island’s total export portfolio, to grow to between 25-28% within the next 18 months.
He was also confident that this Ministry would sort out the promised exporter rewards scheme where payments due exporters meeting certain criteria set by the Government, have been partially or not honoured at all by the Government.
The plethora of holidays that hinder productivity was also highlighted as a negative by De Silva.
Another hindrance was the high interest rate charged on US dollar borrowings. However a banker who did not want to be named told this reporter with dollar deposits allegedly commanding an interest rate of 4.5%, they were therefore forced to charge a higher rate on borrowings.
“If we lower our deposit rate, they will then take their foreign exchange to another bank,” the source said. There is a liquidity problem, that’s why interest rates on dollar deposits are high. “We will re-visit our rates,” the source said.
De Silva said that in countries like Japan, the borrowing rates are as low as 2-2½%.  Here, the dollar borrowing rate is LIBOR + 4-6% with the LIBOR at 0.5%,added Fernando.
De Silva said that the export sector which has been resilient for the past 30 years will be able to cope with the loss in the GSP+ facility coupled with an appreciating rupee.
Sunil Wijesinha of Dankotuwa Porcelain speaking at a recent seminar said that they are looking for new markets with the loss of the GSP+ concession, added De Silva.
He was confident of meeting the Government’s export target of US$ 20 billion by 2020 and even going beyond to US$ 25 billion by 2020.
Cinnamon for instance is being exported in value added capsule form by Sarada De Silva, he said. Sarada told The Sunday Leader that by exporting cinnamon in capsule form, earnings increased by 100 fold, rather than exporting the same in bulk. However that export comprises a mere fraction of the total export which are mainly in bulk, Sarada who has his factory in Maharagama said.
Though exporting in capsule form is rewarding, it’s also very costly, having to pay for the shelf space that has the product on display as well, Sarada, whose main market is Mexico, said. Mexico consumes 65% of Ceylon cinnamon, he added
Steps are being taken here to ascertain whether there is any medicinal value in Cinnamon.
“The capsules are being exported as a food product,” said Sarada. To market the same as a medicine, then the necessary clearances have to be first obtained, he said.
Lal de Alwis of the CIC Group speaking at this forum said that his company exports high quality rice. He said that though 32% of the population is engaged in agriculture, the sector contributes only 19% of GDP. “We are now going to the North-East,” he said.
Meanwhile NCE will have its annual awards ceremony on September 17.