Industrial Association Chief bares why post war biz potential unrealised yet

Wednesday, 27 July 2011 00:50 -     - {{hitsCtrl.values.hits}}

By Devin Jayasundera

  • Claims lack of consistent regime in fiscal, monetary and development strategies as a reason

Industrial Association Sri Lanka (IASL) Chairman and business leader Noel Selvanayagam on Tuesday endeavoured to unlock the puzzle as to why post war potential hasn’t been fully realised by the private sector.

“Whilst the Government is committed to a policy of gradually relinquishing a directly productive role as well as diminishing a constructively controlling role in the economy, the private sector has not been able to make full use of this broad policy stance due to lack of consistent regime in fiscal, monetary and development strategies that would lead to rapid economic growth,” IASL Chief said in his address at the 20th AGM.

However he said that IASL in cooperation with rest of the private sector bodies continues an on-going dialogue with the Government to be a partner in formulating a realistic strategy for a balanced and steady industrial growth in the country.

Selvanayagam said the main priority of IASL which has a membership of over 70, was to assist policy makers in the task of developing industrial strategy.

He stated that the Government had been focusing on rapid industrialisation and expansion since the dawn of peace and pointed out some figures on the improved performance of the industrial sector in 2010 compared to 2009.

“According to Central Bank data, the industrial sector recorded the highest sectoral growth of 8.4% in 2010 over the moderate growth of 4.2% in 2009. The factory industry accounting for 55% of the total industry output had a growth of 7.5 in 2010 in comparison to 3.4 in 2009. The food, beverage and tobacco products category recorded a growth of 6.8% in 2010 compared to 5.9% in 2009. The textile, apparel and leather products industry grew by 5.2% in comparison to 0.6% in 2009. The chemical, petroleum, rubber and plastic products category recorded a growth of 12.2% in 2010 compared to 1.8 in 2009.

The output of the non-metallic mineral products category increased by 10.4% in 2010 compared to a negative of 3.3% in 2009. The fabricated metal products machinery and transport equipment category registered a growth of 8.2% during 2010 compared to 3.4% in 2009.The ex factory profit of non-BOI private sector industries increase by 2.1% in 2010 compared to a decline in profits in 2009”

IASL has made specific recommendations to the Government regarding the formulation of a realistic strategy for a balanced and steady industrial growth in Sri Lanka.

These recommendations include that the retail and wholesale sector to be excluded from NBT or the NBT 2% to be reduced to 1% to offset the Turnover Tax removal. IASL also proposed the grant of permission to continue the excess input tax and to claim such excesses against future output taxes. Selvanayagam suggested that CESS and duties on imported raw material for manufacture in industry to be removed or reduced as a general policy, which would encourage the local manufacture industry and import substitution industry. He also stressed the importance of giving adequate protection against imported finished goods, which are a threat to the local industry.

The chief guest at the AGM Minister of External Affairs Prof. G.L. Peiris in his address emphasised the insurmountable obstacles that the Sri Lankan economy had to face due to the terrorist activities in the country. The opportunity has been presented to the Industrial sector to expand and make the fullest use of the country’s inherent strength and resources    after the eradication of terrorism in the country,” said Peiris.

Referring to the Growth of the Apparel sector by 5% in 2010, “It has sent a convincing answer to the prophets of doom who predicted when the GSP+ was withdrawn by the European Commission there would be no future for the apparel industry”.

The recent issue of the “Economist” has stated that Inward Remittances in 2010 sent by leading Sri Lankan business people abroad amounted to four billion US dollars and that it was a 25% growth compared to the previous year. “With the option of investing funds abroad they find the Sri Lankan economy promising with the ability to fulfil their expectations. This indicates their confidence of the Sri Lankan economy”.

Highlighting the Economic Renaissance of the North Prof. Peiris noted that one of the State banks lent 14 billion rupees of its reserves. This he said, indicated that the people in the north are borrowing money, investing, creating employment on the thriving economic prospects available.

Explaining the favourable Macro economic environment enabled by the government, he stated that the country now had 70 billion in foreign reserves and with a single digit, interest rate there was opportunity for companies to start businesses. Comparing Sri Lanka’s 5% unemployment figure to developed countries in the world he said Greece had an unemployment rate of 40%, Spain 20% and USA 10%.

This environment provides the Sri Lankan economy to move ahead with great alacrity and it is the government’s responsibility to create the necessary conditions for companies to prosper, stated Peiris. He also pointed out that IASL’s main priority was to prepare guidelines and those need to be revised, revamped from time to time to cater for rapidly changing circumstances.

At the recently held Economic Conference in Bali, Indonesia Peiris stated, the Republic of South Korea had shown eagerness to invest and increase the trade volumes. He also mentioned that the employment opportunities in Korea would be increased. The Canadian Foreign Minister John Baird had also expressed his interest in increasing trade volumes to Sri Lanka. The New Zealand Foreign Minister Murray McCully had raised the possibilities of Dairy Farming in Sri Lanka. The Government of Pakistan has embarked on a major product line of cement, sugar, steel and pharmaceutical industries to Sri Lanka placing the highest priority in developing these trade relations with Sri Lanka.

Prof. Peiris said that President Mahinda Rajapaksa is to make a state visit to Pakistan this year and that he Foreign Minister G.L Peiris was to visit South Korea in the first week of September this year. Peiris stressed that all these countries expressed an active and lively interest in the abundance of opportunities available in the country.

He also explained the importance of consolidating the existing and established relationships with foreign countries while expanding new relationships. The Sri Lankan Government is in the process of reviving relationships with the European Union. The Erasmus Mundus project for education, training, and projects that have been set up for fisheries are some examples of the collaborative partnerships with the EU.

In regard to the Global economic environment he said the Western economies have been growing at an average of 2.5% in 2010 and the global economy had grown 4.5%. However, most of the economic activity was visible in the Indian Ocean and the Pacific Rim. India recorded an 8% growth and China a 9% growth in 2010. According to Prof. Peiris, the Chinese foreign Minister at the Bali conference had stated that China had contributed 25% to the growth of the global economy last year and in the next five years; the total value of imports into China would amount to 10 Trillion US dollars.

While stating that in this kind of environment, companies should challenge themselves to exploit the potential of these opportunities that are available, he expressed his concern on the export industry saying, “Of the totality of our exports 20% goes to the United States of America, 49% to Western Europe and to countries like India it is around 7% to 8% and China it is 3% which should be reflected upon.

Peiris revealed that 15 of the largest companies in the US including Boeing had sent a letter of the United States expressing their interest in elevating trade relationships with Sri Lanka.  Japan, which will celebrate the 60th Anniversary of bilateral diplomatic relations next year, had planned a series of events that would specially benefit the entrepreneurial and industry sector.

On Indo Sri Lanka relations, Peiris stated that recently an Indian company — Great Ship India Limited signed a contract valued at US $ 285 million with shipping and vessels manufacturing company Colombo Dock Yard. 70% transhipment business in Colombo harbour originates from India.

“Even though the Indian economy is 30% times bigger than Sri Lanka, Investment to India is no longer one-way. Companies like Damro, MAS holdings, Brandix, John Keells Holdings and Aitken Spence are major investors in India,” said Peiris. He also stated that at one time S. Kamalanath the then Commerce and Trade Minister had referred to Visakapatnam project of Brandix as having enabled 14,000 Indian women to graduate from poverty.

Indigo an Indian civil aviation company, which placed the largest order in the history of civil aviation, had given a huge contract to SriLankan Airlines. SriLankan Airlines is also one of the largest carriers to India today. It operates 100 flights a week to seven Indian cities.

The service sector, which has grown by 58% in 2010 and the tourism business have been the major contribution to it.  The Ambassador of the Islamic Republic of Iran in a discussion with the Minister of External Affairs Prof. G.L Peiris had spoken of the interest of the Iranian Government to invest in the tourism industry of Sri Lanka. “It makes a great deal of commercial sense that in this industry a return is certain and rapidity of the return is guaranteed. He also highlighted the importance of expediting the development of infrastructure to meet the demand of increasing number of tourists to the country.

“Why else would a company like Shangri La pay hard cash of 125 million up front for the purchase of land to build a 700 room hotel in Colombo and another 400 room Hotel in deep South of the island”. He said this generated a certain amount of enthusiasm for other equally large companies to invest in Sri Lanka.

Prof. G.L Peiris recommended new avenues and fields to the IASL. He suggested value additions to agriculture, especially tropical fruits and vegetable industry. He stated that the Government was investing in canning, pulping and processing agriculture products. He also pointed out that companies from Taiwan, Malaysia and Japan have expressed their delight to embark on the fishery industry of the unclaimed waters of the northern seas. The packaging industry is also prospering industry that Sri Lankan companies should set their eyes upon because it cuts across all industries, which include tea and spices, said Prof. Peiris.

“So the World is before you. In the past however hard you tried there really was a point beyond which we could not succeed because of the phenomenon of terrorist violence. This is no longer the case now. The new situation that has arisen has provided unique frontiers of opportunities to the private sector to thrive and prosper and develop the Sri Lankan economy. The Sri Lankan Government will provide the necessary support and facilitate debates and discussions for the development of the industrial sector, he added.

Prof. G. L Peiris in his concluding remarks commended that IASL Chairman Noel Selvanayagam for his service to the growth of the industrial sector in Sri Lanka.