Exporters’ warning

Friday, 21 January 2011 00:01 -     - {{hitsCtrl.values.hits}}

THE country’s export sector, especially the majority who are small and medium in scale, as reported in the Daily FT yesterday are in crisis.The financial press of late hasn’t seen business groups come out in public and in unison to highlight their grievances, partly because of fear of being reprimanded by the Government or drawing the wrath of the subject minister. Some groups, having made representations to the officials, remain hopeful of redress and if rejected, they suffer in silence.

However, perhaps given the degree of their crisis, the National Chamber of Exporters (NCE) on Tuesday took a bold and commendable decision to make known problems faced by their members.

Styling itself as the ‘Voice of Exporters,’ the 450-member-strong NCE’s President Sarath de Silva clarified that they weren’t pressuring the Government, but endeavouring to make key stakeholders and the country at large better understand the need to support and safeguard the export sector.

This objective exercise and perhaps constructive opinion shared is important considering the fact that the private sector in general and the export sector in particular often tend to be misunderstood and undermined by other stakeholders such as politicians, public service and the trade unions.

For the financial press, the revelations made by NCE members on Tuesday about the multiple hits on Sri Lanka’s overall export competitiveness were startling. Representatives from leading companies in key sectors such as porcelain ware, rubber products, coconut products, sea food, ship building and repair, boat building, apparel, fruits and vegetables and confectionery came forward to highlight a host of issues affecting the competitiveness of their export products or services in the global market.

To recap, their main concerns were the high new electricity tariff; high energy cost especially industrial LPG, the loss of EU GSP+, the suspension of US GSP scheme, appreciation of the rupee and the high cost or lack of readily available raw material, for example coconuts for the coconut products sector.

Their concerns sounded very genuine hence valid and the fact that they came out in public and confirmed their desperation. The message was clear: The survival and success of the export sectors amidst global and local shocks were under threat.

The export sector as well as the overall private sector must be credited for their resilience over the year, despite facing unprecedented challenges locally and internationally. In 2010 Sri Lanka’s exports were able to recover the lost ground in 2009 in global markets. In 2009, exports dipped to $ 7 billion from $ 8 billion in 2008. Last year export sector performance bounced back to $ 8 billion, reflecting 13% growth.

From a critical perspective, Sri Lanka’s exports are still at 2008 levels so the country cannot be overly happy of the performance in 2010. Therein lies the real challenge and the competitiveness issues highlighted by exporters need some serious attention from President Mahinda Rajapaksa downwards in the Government.

Exporters acknowledge that the Government has given a tremendous advantage to the country and private sector by heroically crushing terrorism in May 2009 as well as improving macroeconomic fundamentals such as a lower interest rates and inflation regime. Furthermore, due to there being no terrorism, exporters and the private sector have been enjoying low or zero risk premia on insurance as well as lower cost in terms of security.

However, exporters pointed out that during the past six months, external factors-driven cost increases such as the new electricity tariff and threats to their competitiveness such as the loss of preferential access to major markets of the EU and US have negated some the benefits which would have otherwise been to the exporters’ advantage. Though the Government has forecast double digit growth in exports in 2010 and aims to achieve $ 20 billion through exports by 2020, exporters have expressed reservations. In our editorials we have regularly maintained the need to prioritise export development by reminding the country that it boils down to “export or perish”. Reactivation of the Council of Ministers for Export Development under the EDB Act is a critical suggestion on which the Government can act fast. In this forum the Government has the chance to highlight its own initiatives to boost development as well as listen to exporters’ suggestions on the way forward. Failure will only result in unnecessary undercurrents and misunderstanding by either side.

As an exporter highlighted, post-war Sri Lanka certainly can get its export growth right. For this, greater trust, support and cooperation between the Government and the export community are critical. If not Sri Lanka will certainly miss the boat, yet again.