By Devin Jayasundera
A top Finance Ministry official last week declared that the country’s import sector has bright opportunities on to the future in tandem with fast growing economy and per capita income of the people.
Delivering the keynote address at the Ceylon Chamber Import Section Annual General Meeting the Ministry of Finance and Planning Department of Fiscal Policy Director General K.M. Mahinda Siriwardana said based on future forecasts of the economy and consumer spending the importer sector has great scope.
He noted that one of the striking transformations of the imports structure is the significant emergence of investment related imports. “In 1977 investment related goods was only 13% of total imports while the consumer and intermediate goods accounted for 42% and 45% respectively. In 2010 investment goods were 15.7%, consumer and intermediate goods were 27.2% and 55.3% respectively. This reflects the enhance investments and gradual transformation of the country’s industrial base as Advanced Technology driven economy”.
In regard to the reduction of taxes Siriwardana stated that to promote Sri Lanka as an attractive destination for international shopping, taxes for branded electronic items such as watches and mobile phones are reduced. He also said that goods related to tourism and construction industry, IT and BPO sectors, technology driven agriculture machinery are reduced to accommodate the country to move into the next level.
He also touched upon the importance of the import industry as a key revenue generating source for the government through imposition of various related taxes. Imports account for 47% of total government tax revenue in 2010 which is Rs.725 billion.
To sustain the country’s recent high economic growth, it will require a high amount of investment around 35% of GDP from 27% at present noted Siriwardana. “When the economy grows at a faster rate with high level of investment there will be an enhanced demand for capital and infrastructure to sustain the expansion. Therefore additional resources would be needed and it cannot be fulfilled by domestic supply alone and imports are needed to fill the gap between the domestic aggregate demand and any shortage of supply.
Commenting on the dynamics of the consumption of the Sri Lankan public he noted that the elevation of Sri Lanka as middle income status country and the change of the consumer pattern have projected the affordability of the consumer for diverse demands of goods and services. The periodical household and expenditure survey states that the food ratio which stood at 65% in 1981/81 has declined to 42%. This implies that the consumer is shifting towards increased reliance of electricity, telephone, fuel, gas, consumer durables and fast food items which in result would create bright opportunities for importers.
Oil one of Sri Lanka’s major imports which accounts for three to four billion US dollars a year needs to be reduced to save at least a portion of the cost by encouraging renewable energy sources such as wind, coal, solar and LNG stressed Siriwardana.
In regard to import substitution industry Siriwardana mentioned that due to harsh experience the Sri Lankan economy faced due to the high increase of commodity prices and high inflation of 23% in 2008. The government has highlighted the importance of food security; therefore the government is taking necessary steps to increase domestic production in milk, canned fish and other agricultural products such as rice, potato, onion and maize. In regard to industrial goods government is encouraging SMEs to produce organic fertiliser, school uniforms, pesticides etc.
In his concluding remarks he said the expected high economic growth and the anticipated increase in private investment will make excellent prospects for importers in the future particularly in industry and service sectors”.
At the AGM, the Import Section of the Ceylon Chamber of Commerce too expressed their relief of the resurgence and the recovery of the import sector in the year of 2010. The value of total imports increased to 34% from US$ 10,207 million in 2009 to US$ 13,511.7 million in 2010. In the first five months of 2011 imports recorded a remarkable growth of 48% which is 7761 million US dollars.
Chairman Mahesh Wijewardene in his address reflected the progress and the performance of the import sector in the previous year and highlighted the necessary policies and proposals that need to be implemented.
WIjewardane emphasised the significance of imports in the country’s economy which contributes as a value adder, a growth facilitator and as a revenue earner to the economy. He also highlighted the progress that the import section achieved was to the improved economic conditions of the country, increase in consumer demand, favourable revisions of duty and other taxes and the positive outlook prompting the growth and investment of different sectors.
The Import sector of Ceylon Chamber of Commerce stressing the need for increased integration of the Sri Lankan economy with global markets said that the necessity to instil a robust policy framework which will strengthen and facilitate a free and fair trading environment, thereby Wijewardane stated, some of the recommendations and proposals are put forward for consideration of policymakers.
Formulation and implementation of a simplified tax policy which enables a consistent Duty/Tax system for imports.
“Having a simplified tax system would ensure a simplified revenue management system for the government and a more effective operational process for the importers” said WIjewardane.
Duty/ Tariff structure to be in line with regional structures to be equally competitive.
He pointed out that that even though certain taxes were lowered at the last budget several categories of import tariffs are on the high side and this would enable grey market activity, under evaluation and entry of low quality goods.
Request to increase a grading system of importers and provide concessions and special treatments for reputed importers.
To discontinue the 100% in-house cargo inspection system of Sri Lanka Customs that was instilled as a measure of security three years ago, as a result of which, the cost of imports is increased said Wijewardane.
To have a stable exchange rate that would enable the importers to adapt according to market dynamics.
Bringing down the operational cost of the Colombo port which is highest in the region.
The need to expedite the development of “Enabling services and infrastructure” for importers such as EDI systems.
Revising of duty/tariffs and classification on a periodic basis depending on the latest market behaviour and products.
In his closing remarks he stated that the Import section of Ceylon Chamber of Commerce will provide the platform to support its member companies as a forum for topical issues, ensuring a level playing field and also work towards reducing cost of importation by bench marking against acceptable trade practices.