Exporters call for more Govt. support

• Stakeholders list areas of improvement and proposals to be submitted for Budget 2013
• EDB Chief confident performance will rebound in second half

By Cheranka Mendis
Impacted by negative growth so far and mounting challenges, exporters are urging the Government should extend more support for an early turnaround to save jobs and boost foreign exchange.

Discussing the present state of the export sector and proposals to be submitted to the National Budget 2013, industry stakeholders on Wednesday noted the need for higher cooperation and the importance of implementing a National Export Policy to support future growth.

Export Development Board (EDB) Chairman Janaka Ratnayake stated that the board would submit a proposal to receive Rs. 1 billion to support the sector in addition to the development funds received in the current Budget.
Quoting provisional data for June this year, he stated that the industry had registered over US$ 900 million exports during the month, bringing down the decline in exports to 4%.  Expecting to close the year at US$ 11 billion or more, Ratnayake expressed confidence in better times ahead, especially during the next six months.
“I am optimistic that the trend of the past years will continue and that we will have a growth rate in the 20% range.”
Exports to GDP ratio has declined from 32% to 17% from 2000-2011, while contribution to world trade has declined from 0.9% to 0.6%. “This is only a numbers game. However, our game is to reach US$ 15 billion by 2015,” Ratnayake said.
Having analysed the declining trend, the EDB Chairman noted that the main reasons behind the decline was the slowdown in certain sectors such as boat building, which fell by 98% over the last few months, the 33% decline in natural rubber, the 33% decline in the spice sector, especially in cloves, nutmeg and mace, and the 40% decline in the handloom sector.
“We hope to suggest and propose to the Government an initiative on national branding for the country similar to the ones carried out by other countries to promote Sri Lanka’s profile in multiple mediums,” Ratnayake said.
The board is also seeking the support of the Government for individual companies to brand internationally working at “perhaps a 60:40 formula with 60% of the money to be pumped by the EDB and 40% from exporter”. The EDB also suggested shifting markets to new emerging nations.
“For this, we need to come out with a common formula, where the Government will unconditionally support the export sector. No country can develop without exports.”
Agreeing to a representative from the spice sector’s comment on the Government’s neglect of the sector during the past four years, he said. “Even though we are trying our best with the resources available, the Government has not given us due recognition.”
Following are comments made by stakeholders on their particular industries:
 Spice sector: The growth in the first two quarters of the year was not good due to the drought but the industry is confident of recovering a position to close on last year or little more with the bumper crop of pepper that is now being experienced. More incentives must be given to encourage the private sector since the export industry currently competes overseas with local policies, which affect the gamut of exports. Unless there are major macro-policy revisions in favour of exports, the country will not be able to recover its position in the world market, the representative said.
Ornamental fish sector: One of the key concerns in the industry is that many exporters do not have quarantine facilities to store the fish. Since fish are collected from all parts of the country, transportation also becomes an issue. Due to the weather conditions a lot of fish taken to the facility closer to the airport gets affected due to the heat. Based on export performance, if the exporters are allowed to import duty concession freezer trucks, it would augment the use of fish produced, industry representatives said. In addition, to support the demand for fish found in certain parts of the Indian Ocean, a request was made for the Government to look at a system where there would be no duty or VAT at the airport.
Coir sector: Two views were presented in this sector, with manufacturers stating that currently a large amount of raw materials are exported without any value addition. Being a sector that has been neglected but one that is capable of generating more income, proper infrastructure and legislation must be put in place. As a resource-based industry, a request for cess to be placed on those who export raw material was mentioned. In the case of producers, it was noted that if the cess was implemented, India would widen the gap between the two countries in this area and competitiveness would decrease, with the material fetching a low price. A request for cess to be operated in a transparent manner was made.
Apparel: Apparel sector exports declined by 5% this year due to the drop of cotton prices. Since the imports in the sector have also dropped, there has been no big change in the net foreign exchange in the sector. The trend is expected to continue as prices drop further. The sector is now focused on the ‘hub concept,’ which was worked out in the last Budget proposal where all legislation has been passed to anticipate US$ 1 billion within the next three years. Working against the sector is the fact that the local market does not enjoy a level playing field as most countries have preferential treatment except Sri Lanka. The country too must work to gain preferential treatment access wherever possible. Stakeholders have put the proposal forward to the Government; however they have not been able to break the ice as yet.
Gems and jewellery: The sector is experiencing similar issues as apparel, where other countries with preferential treatment get easier access and are more competitive than Sri Lanka. Regularising the market was discussed.
Metal: The key issue is that there is no clear policy for metal. A clear policy on metal defining in terms of what is expected of value addition and what value needs to be added needs to be computed. Government support for the industries that train labour was also discussed; a minimum subsidy or support to pay the wage for the first two years at least was requested.
Vegetable exports: Having already submitted a five-point proposal to increase production, the industry representative discussed the need for incentives to go for long-term planning. The Export Development Investment Support Scheme (EDISS) should be reintroduced to support increase in productivity, they argued.
Rubber: After the first six month performance, slower growth is expected during the year. Due to the situation in the EU and US, the industry does not expect to grow in dollar terms this year. However, the plan is to maintain volumes. Availability of raw material was noted as the key issue. A proposal for all Ministries to get together and give more incentives to rubber plantations and fast tracking procedures was put forward. Energy and electricity cost was also noted as other main issues.
Footwear: The need for incentives was discussed for the sector. The VAT incentive is not high enough to encourage exports and many would rather sell domestically, sector representatives said. Other incentives to get duty component, etc., are tedious as well and the money and effort spent to acquire it are far more than what they get in return. A direct incentive to exporters based on the value of exports was suggested.
Floriculture: The sector is falling due to the lack of support to import new materials and varieties to Sri Lanka to export with value addition. Land constraints were also noted.
Boat building: Having recorded low growth in the recent past, the fall was attributed to the current situation in Europe. However, the industry currently has a certain amount of contracts at hand which are now being executed, through which the figures are expected to change in the near future. The key issue is the large number of boats that are now being imported into the country on duty free concessions.
IT/BPO export industry: The industry is not experiencing negative growth and has recorded a 10-15% increase in dollar terms. However, there are no statistics to back up the numbers. A method to make it mandatory for all exporters to declare exports was requested. Electricity cost, branding and infrastructure were noted as areas to be worked on.
Exporters Association of Sri Lanka: Talking of value addition, the majority of the membership commented that although they get duty concessions on the importation of machinery for value addition for exports, other ancillary taxes such as NBT, etc., add up to a fairly substantial amount. Noting that in the last Budget a concession was given by waving ancillary taxes on research and development on the importation of green houses, the association requested the same to be applied to all value addition machinery that is being brought in by registered exporters. The ancillary taxes sum up to 7.5% to the total value of the invoice.
Ministry of External Affairs: Noting that there are over 50 missions in foreign countries, the Ministry requested exporters to make use of the body to promote products or find new markets.