Tiles and sanitary ware industry: Is excess protectionism hurting the end consumer?

Tiles and Sanitary ware Importers Association (TSIA), a core organisation established a decade ago mainly to address the grievances and to guide its members towards a fair business policy, presented the issues regarding the protection taxes enacted over tile and sanitary ware imports in Sri Lanka at a press briefing recently held at Jaic Hilton Colombo Residences. 

While 60% of the market share is owned by local manufacturers, the importers are surviving in the industry with a 40% of market share. It should be noted that any industry whether imports or manufacturing needs to coexist with highest degree of competitiveness. While the local manufacturers have been out there for a long time in the market, it has been detected that the sector has several weaknesses to retain competitiveness in the industry. Always they have depended on the government protectionism to sustain the market capture. 

As a result the imported products have to pay very high taxes by means of duty, etc. As a result the construction cost in the region has escalated immensely thus resulting in the country being one of the costliest in the region. Here it is important to note which industry the policy makers are planning to save; is it the local manufacturing industry or the local construction industry? In either case the policy makers have the responsibility to safeguard the interest of the ultimate consumers.

In addition, Ceramic production is a highly energy consuming production field, and Sri Lanka is faced with competition from countries with ample local energy reserves. Import of fuel and few other raw materials has risen the challenges faced by the manufacturers. Hence the expansion probabilities and competitiveness are demoted with time. 

On the other hand Government has provided the local manufacturers with 100% plus protectionism in addition to the fuel subsidy for their production, through privileges such as domestic preference. This means, in most government tenders, even though they are 20% higher priced, still they are preferred and chosen for the tender. Every import also has to pay a 100% plus protection taxation to the Government, providing an all-round protection to the local manufacturers.

It is a wise and an important step of every Government in Sri Lanka to support the local manufacturers for anti-dumping and thereby providing opportunities for Sri Lankans. Yet since any industry requires competitiveness to sustain in the long run, local manufacturers in any country should be encouraged with competitiveness in mind. The low population, geographical and other factors have elevated the production cost and curtailed the local production industry to be less competitive and therefore imports has also become a crucial sector to sustain as an industry, especially in the field of construction.

Addressing the gathering, The Board of Management of the Tile and Sanitary ware Importers Association stated, “The prodigious myth about tile and sanitary ware imports in Sri Lanka, is that these products are junk products that India, China, Indonesia or other markets aspire to get rid of. But these products are equally quality assured as the products exported to other countries. The tiles imported into Sri Lanka are scrutinised by policy makers to 100% check for SLS standard which is equivalent to ISO standards, since at least 10 years. Tile cargos are released from the customs, only if the samples are drawn to the SLS standards.”

Before 10-15 years such standards or awareness were not seen in the industry. But Tile and Sanitary ware Importers Association has since attracted and brought together the importers around the island, and educated them with programs, workshops in collaboration with SLS in Sri Lanka. Furthermore the statistics reports in SLS standards show that the rate of such rejections for low quality products has seen a drastic reduction over the years, proving the quality elevation. SLS has honoured the association for such drastic quality improvement over the years.

They further emphasised on the fact that they do not intend to penalise the local manufacturers, but that the authorities and the other parties should comprehend the negative impact that the economy and the consumers will experience if taxation is further elevated for imports in order to protect the local manufacturers. “Another drawback with manufacturing ceramic in Sri Lanka is environmental pollution. As an economy relying heavily on tourism, it is important to maintain environmental quality and consider about other industries to sustain and co-exist in Sri Lanka,” they further added.

In concise, the imports industry of tile and sanitary ware has achieved quality, competitiveness while providing revenue to the country, in spite of the 100% plus protectionism tax and other barriers in the Sri Lankan and international economic arena.

The association has stated that the key party facing the negative impacts of these further tax increases are the consumers and the construction industry in Sri Lanka. In another view, while taxing the imports to save the local manufacturing industry, the local construction industry could be at stake. IMF has already detected this issue in Sri Lanka where protector segments depend on lobbying has caused inconvenience to customers.

Therefore each of these industries and market sectors should be able to coexist. Since Government has already provided 100% plus protection to the local manufacturing industry, the Association believes that it’s time for the Government to consult and encourage the manufacturers to explore for avenues where they can be competitive and thriving. Elevating taxation or monopolisation will not enhance the Sri Lankan economy or the industry and Tile and Sanitary ware Importers Association welcome all the parties in the industry to explore other means to improve industry and co-exist in prosperity.