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Sri Lanka’s construction landscape is booming and this sector is gaining momentum with the boost in the number of foreign investments that the country is also heavily attracting. As a result, the construction sector needs to fulfil the aspect of supplying to the various entities that come together to see through the completion of such mega projects.
Tiles and Sanitary Ware Importers Association President Kamil Hussain
The Tiles and Sanitary Ware Importers Association (TSIA) had been lobbying for quite some time for a duty and cess reduction. Initially, the tariff which was imposed at 160% during the previous regime was reduced after the Minister of Finance Ravi Karunanayake had intervened with this matter during the budget hearing last year. This time round too, the Minister was influential in maintaining the previous budget hearing’s tax reduction for imports and has been commended for having taken the time to listen and understand the issue that was lingering amongst tile and sanitary ware importers in Sri Lanka.
When accumulating the duty and cess taxes that were being imposed on the importers, figures added up to a staggering rate of 160%. During the 2015 Budget hearing, as a result of the TSIA coming forward and highlighting the issue of high duty levies, the Minister had, as promised, brought down the duty percentage to a reasonable level.
Stressing on this effect, Tiles and Sanitary Ware Importers Association (TSIA) President Kamil Hussain sat down to discuss about the current situation pertaining to tile and sanitary ware importers in Sri Lanka and how the budget affected them. Following are excerpts:
A: The TSIA is the one and only importer’s chamber for tiles and sanitary ware in Sri Lanka. Initiated 10 years ago, the organisation currently administers to over 100 members who import and supply tiles and sanitary ware to Sri Lanka. I was elected President of the Association this year and ever since then, we as members, have got together to implement ourselves as a safety net for tile and sanitary ware importers. There are a lot of threats in the market that the industry is currently facing. So, we wanted to come out as a team and work to sustain a proper import mechanism.
As an organisation, we are of the view that there should be fairplay. We respect local manufacturers and their stand in the business and economical sphere. Sanitary ware today has become a basic need and is not a luxury need anymore. This also means that not just because of aesthetics that these products encompass but this also shows how the public today perceive their attitudes towards the maintenance of hygiene and sanitation.
The construction industry in Sri Lanka is growing considerably. This involves individual homes, mixed developments and the hospitality sector. Tiles and sanitary ware adds a lot of value to construction buildings and as a result, can bring significance to the other segments as well. The Government also has encouraged growth in housing and hospitality.
Many brands such as Altair and Shangri-la have already penetrated into the country and similar to these entities, there is great demand available. Sri Lanka is not entirely self-sufficient to cover the demand for tiles and sanitary ware. Even technology-wise, some tiles cannot be manufactured here as there are some particular aesthetics in these products that is being demanded by foreign builders and construction experts based in Sri Lanka for construction and real estate projects. Therefore, importers play a pivotal role in catering to that demand.
A: Countries such as India are heavily dependent on energy, but in Sri Lanka energy costs are exorbitantly high and this eventually leads to a higher product cost. With the current government’s policy to incentivise and grow the construction industry, their aim is to provide housing, incentivise and promote the hospitality industry whilst looking at reducing the cost of construction and give consumers affordability to help them improve their lifestyle.
We engaged with Minister Ravi after the current government came into power, relayed to him about necessary policy changes on this matter and we delivered whatever we hoped to achieve through this. We also explained to him that the cost of tiles and sanitary ware in Sri Lanka were priced at a very high level because of import duty and cess. They did also have questions with regard to quality. The perception was inlaid with regards to some imported Chinese products not being on par.
But, we want to assure everyone that all imported tiles need to go through SLS Standard checks before the go ahead is given. So, until SLS gives the green light do we go forward with supplying our products to our consumers? We, as an Association, motivate and encourage our importers to import quality tiles and sanitary ware to Sri Lanka.
A: As a result of high import duty and cess, especially interior designers of the hospitality industry fell into a challenging situation when it came to balancing architectural aesthetics and the cost of construction. They like to come up with creative designs but that turns out to be too expensive so they find it hard to exercise their creative side more freely.
On the other hand the people or the end consumer, who has the thirst to improve their lifestyles and upgrade their sanitation status in their homes, has to settle with substandard or inferior material due to these reasons. After the Minister’s intervention, he agreed to reduce the duty and cess on one condition; that the price of tiles and sanitary ware imported to Sri Lanka will be offered to consumers and interior designers for a reasonable market price.
During the recent budget and the budget hearing before that where Minister Ravi presented the changes, he maintained the reduced duty and cess and as promised the tiles and sanitary ware importers reduced prices accordingly.
A: As an Association, we do not want to undermine the local manufacturers. As a responsible business chamber, we value their existence. We also feel that we need each other whichever way. On occasion, local companies also do engage in part imports. Sometimes, there will be certain designs that they can’t manufacture.
On one hand, tile and sanitary ware importers also happen to be serious contributors to the government; the industry is worth about Rs. 15 billion annually and there are over 10,000 direct and indirect employment opportunities that had been provided because of this industry.
A research that was conducted by the Lanka Market Research Bureau Ltd. (LMRB) indicated a contribution of Rs. 6 billion annually by way of direct import duty. This excludes other taxes such as corporate tax. We also wanted to dissect our market share in Sri Lanka, for imported products. In 2014, according to LMRB, importers had a 49% share and local manufacturers had a 51% market share. Importer’s figures had grown considerably and continue to gain momentum.
A: This is a very highly polluted industry. Pollution is an existing issue amongst the masses living in the vicinities. This is one reason why we had also asked the Minister not to encourage this industry of manufacture into Sri Lanka because this will only add up to the problem of pollution. Our country, as a travel destination is vital for our economy and so this is what we can offer to the tourist and if we pollute our surroundings, then we will only discourage people from coming over.
The other main issue is that energy prices are very high in Sri Lanka therefore, it is not feasible for someone to come and manufacture here. Energy costs abroad are about 30% of the total product. India runs over 600 factories manufacturing these products so they can easily cater to the demand in Sri Lanka.
My belief is that we should continue encouraging industries that would not pollute the environment to establish themselves here because the country is also a tourist destination and we need to leverage on that prospect. We are not simply traders and importers who don’t care for the benefit of others. But, we also aim to protect the environment from potential dangers in this process.
A: We greatly appreciate the fact that the Minister took the time to understand the issue at hand and supported us accordingly. Minister Karunanayake was initially not familiar with the industry but got his advisors to take up the case and swiftly implemented action to relieve us to the level we have achieved now. We at the TSIA are very happy with the professional approach that the team at the Ministry of finance had adopted as they were willing to listen and we as businessmen in Sri Lanka, need this kind of people who will take their time to listen in, cooperate and give out a fair solution which will be acceptable to everybody.
Because of the Finance Minister’s intervention the cost of construction in terms of tiles and sanitary ware has come down considerably as well. A majority of the market for imported goods is still driven by individual customers. Many people from rural areas are also evolving from red cement to tiles. So they are upgrading their lifestyle and im
proving their households. We as importers are grateful for the support that the Ministry of Finance has given us and we believe that this type of change will only help grow the economy.
