NCE on Interim Budget proposals that impact exports and import substitutions
Monday, 9 February 2015 00:00
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The National Chamber of Exporters of Sri Lanka (NCE) conducted its 20th Annual General Meeting (AGM) at Hotel Galadari where Dr. Harsha De Silva, Deputy Minister of Policy Planning and Economic Development, addressed the gathering as a special guest.
During his speech, he emphasised that high importance would be given the export sector of the country as it plays a vital role in earning foreign exchange. In this regard, the Interim Budget submitted in the latter part of January has direct and indirect impact on exports of the country.
The reduction in fuel prices especially on LP gas prices will provide some relief to export enterprises in relation to high energy costs in Sri Lanka in relation to competitor countries. However it is necessary to reduce the price of furnace oil to have an impact on high energy consuming ventures particularly the ceramics industry and the printing and packaging industry.
The chamber highly appreciates the steps taken to streamline the activities of the Customs, which will facilitate and reduce costs related to logistics.
The specific encouragement of Rs. 100 million proposed to be provided to the inventors to commercialise their inventions will promote commercialisation of innovations, which is vital to be competitive internationally and should be effectively supported with venture capital type of assistance.
It has been stated that actions would be taken to regain the GSP+ facility. The country has enjoyed this concession for several years and it has undoubtedly assisted country’s industrial exports. The loss of this facility has resulted in a loss of about $ 5,000 million in the past seven years. Therefore this is vital for the development of industrial products such as garments and fisheries, which mainly export to the EU.
The NCE appreciates the effort taken by the Government to suspend the EU ban on fisheries as Sri Lanka is the second biggest exporter of fishery products to the bloc, with the annual export value exceeding $ 125 m.
The proposed guaranteed prices for potatoes, dairy, tea and rubber will boost production. However its impact on margins of exporters has to be analysed. This will also reduce imports of milk powder by boosting domestic production and import substitution of potatoes.
The NCE appreciates the Government for continuing the fertiliser subsidy and focus given to the quality of fertiliser in upgrading which will have positive impact on the exports.
Post-harvest wastage in fruits and vegetables is very high and estimated to be around 40% due to poor packaging practices, etc. The proposed 50% tax reduction for the entrepreneurs who commence businesses in this sector, especially the SMEs, will support food processing ventures for export market. In addition, the tax incentives proposed for intercropping activities will also encourage the agriculture sector to diversify their crops.
The proposed 50% reduction of the normal income tax for investors investing in lagging regions of the country will support NCE’s ongoing project in the Northern Province which focuses on establishing business linkages for mutual benefit.
The proposal to set up new Export Processing Zones (EPZs) and to facilitate existing ones which are not fully functional will facilitate Foreign Direct Investments (FDIs) for export and the proposed one-stop-shop business facilitation networking unit will facilitate and attract more FDIs.
