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Wednesday, 13 November 2013 00:36 - - {{hitsCtrl.values.hits}}
Gregory noted: “There is a renaissance on the importance of manufacturing. Manufacturing is back and there has been a rebalancing of understanding on what manufacturing is and what its importance is.”
While value addition is vital for brand and product enhancement as well as for increases in the cash flows, it is important to look at the supply chain of manufacturing to better understand the process, he said.
Traditional Industries and Small Enterprise Development Minister Douglas Devananda noted that multifaceted programs have been introduced by the Government under the ‘Mahinda Chinthana’ policy framework, giving various tax incentives for the manufacturing industry. “Within the framework, BOI has identified priority sectors for attracting investors and has given many incentives on various levels,” Devananda said.
Tax incentives
Under 2012/2013 policy directive, tax structures have been streamlined under a single scheme to promote manufacture in the export-oriented sector, local market-oriented sector that substitutes for import products and large-scale projects with substantial inflow of foreign exchange and technological transformation, he expressed.
Tax incentives, and for the latter, even a 25-year tax holiday is given on merit. “The Government is confident in achieving a high value-added manufacturing sector.”
Rinstrum story
An Australian company that is associated in the weighing industry, Rinstrum Smart Weighing Australia has chosen Sri Lanka to expand its manufacturing operations. Company Director Paul Cooper noted that the country was chosen after analysing various markets that included Vietnam and Thailand.
Sri Lanka was chosen as it is located closer to their sales hub and component base with cost and environmental benefits.
“Operating in the blue line is important when manufacturing is in Australia, which is a logistic nightmare,” Cooper said. “In Sri Lanka our model changed. Also, the Australian currency has boomed after the dip in recession largely because of our resource base to China. The Sri Lankan rupee is now picked as an expense currency. Our partners in Sri Lanka and their assistance, our environmental awareness and solar generation have also been plus points for the company.”
Cooper also noted that the company will launch the first produce from Sri Lanka, a US$50 million product, during the next month.
Tea talk
Sri Lanka’s unique beverage that has taken the country to the world, Ceylon Tea, is the third largest foreign exchange earner in the country, with a direct and indirect work force of two million and 76% of tea being produced by smallholders. Contributing to 65% of export agriculture and 14.5% of foreign exchange, Ceylon Tea fetches the highest prices in the world market.
Sri Lanka Tea Board Chairman Janaki Kuruppu acknowledged that the country has plans for increasing its value addition further in the tea industry. With the cost of production increasing, especially with the rise of the cost of labour, it is essential to “sell tea in a better way, which is harder because it is an agricultural product”.
Noting that the values remained high even though volumes took a dip in 2012-2013, she asserted that even though the value-added teas being exported are at 40-50%, on the retail shelf there is a 90-100% price increase. Kuruppu also expressed that Ceylon Tea is way ahead of other countries having moved away from being only a beverage to other areas such as food and non-food – shampoo, spa products, etc.
“The Government, through tax concessions, benefits and tariffs, has promoted value addition in the sector,” Kuruppu said.
Making medicine
Sharing their experience in the sophisticated area of discovering and making medicine, Cadila Pharmaceuticals India Chairman and MD Dr. Rajiv Modi expressed that only a handful of Commonwealth countries have embarked on manufacturing pharmaceuticals even though doing so would ensure health security of the people.
Having grown from a two-person company established after India’s independence in 1951, Cadila today produces 800 medications. “It was not an easy task,” Modi said. “The industry is a knowledge-based industry, which is ideal for Sri Lanka. It is also a globally harmonised industry.”
He explained that the quality systems in manufacturing are harmonised globally, with WHO as the gatekeeper, which is a benefit for interested countries. R&D plays an important role in the field to ensure affordable price tags for consumers. “It generates employment as well,” he said.
Value addition
Former President of the National Chamber of Commerce Asoka Hettigoda stated that most Commonwealth countries don’t know the meaning of value addition, hence they export raw material. “The few who know don’t want to share it,” he said.
Emphasising on the importance of value addition for a country heading towards middle income level, Hettigoda said: “We have missed the boat, even though this creates more employment, higher margins and faster payback and makes you less prone to market shocks.”
Hurdles to value addition in developing countries such as our own is competition with other countries, good techniques not being freely shared, requirement of large effort and market research. “In Sri Lanka access to technology is a key barrier, while cost of production, tax barriers, lack of skilled workforce and the need to regulate innovation are also key issues.”
More R&D should also be spent in this regard, he said. “We should innovate, think creatively and focus on niche markets playing on our ethical practices, nano technology and sustainability,” Hettigoda said.
