- Sri Lanka must highlight ethical proposition
Whilst it was refreshing to see the 2025 national economic policy being launched by the President and Prime Minister, a point that needs to be highlighted is that the trade gap has increased from 8.1% in 2014 to 8.4% in 2015 and 9.1% in 2016 which does not augur well for the country’s performance given that Sri Lanka was expecting an aggressive private sector savvy approach from 8 January 2015.
SL - ground reality
If we look at the ground view of Sri Lanka, we see that its sectors are struggling even though we must take note that the world economy is facing challenging times. FMCG consumption has declined by 2-6% while property market sentiments are down following the announcement by Moody’s last week that the banking sector rating was reduced to negative on the alleged bubble formation exposure of the property market. The overall consumption of the construction sector reduced to 0.3% growth in May, confirming the industry slowdown.
On the export and tourism front the single-digit growth as at end June 2017 does not augur well for the industry that is choking on the increasing cost of the supply chain. The announcement that the tourism digital marketing campaign is hitting the global marketplace only in 2018 further shocked the industry given the challenging times currently experienced where four out of the seven months in 2017 registered a decline in arrivals as against last year.
Apparel -4.7% in 2017
The silver lining for Sri Lanka in my view was the latest report from the European Commission revealing that 41 million counterfeit products had been detained by EU Customs authorities of which 80% of them had originated from China. This is a point that Sri Lanka must take advantage of given the GSP+ facility that has been restored to the country for it being ethically correct with its manufacturing. Incidentally Sri Lanka recorded -4.7% on overall exports of textiles and garments and by highlighting ethical compliance Sri Lanka’s export revenue can get a boost.
A point to note is that fake goods not only threaten intellectual property but also threaten the jobs of workers which is a very serious violation which outweighs the lower price points that competitive merchandising exporters offer globally. Given the stipulations that Sri Lanka has honoured in order to receive the GSP+ facility, we must now move on to commercialising this concept so that we see the advantage in numbers.
China – No. 1 offender
The value of the items that have been detained or confiscated is a staggering ¤ 670 million, with the items including consumption-driven food and drink, pharmaceutical products and household items such as toys and electrical items, which does not hold well for European regulators that want to sell ethically-manufactured merchandise to the discerning European consumer.
Taxation and Customs Commissioner for Economic and Financial Affairs Pierre Moscovici in a news report stated: “A high level of protection of intellectual property is crucial to support growth and create jobs. Fake goods pose a real threat to the health and safety of EU consumers and also undermine legal businesses and state revenues.”
Given that the fake products are not only lifestyle brands but life-threatening medical products, the hard stance taken by the commissioner is justified. The only challenge is that the top items include such lifestyle categories like cigarettes (24%) whilst the second most detained item is toys (17%), followed by foodstuffs (13%) which in my view means that there can be serious health ramifications for generations to come if this new world order is allowed to become an informal economy in Europe.
- ethically compliant
Let’s accept it, Sri Lanka has the highest standards for being ethically complaint. We have a track record of zero counterfeit allegations. This leads to equal opportunity rights for workers, adhering to stringent labour laws, good working standards on the hygiene and social fronts which technically can fetch a premium price just like what the tea industry does on the Rainforest Alliance certification front. Let me throw more light on this stance.
Ceylon tea - model
If we dive deep into Sri Lanka’s tea industry, we see that strong leadership in the last 10 years through a private-public partnership has earned it a global positioning as the first ozone-friendly certified tea-producing nation in the world.
If we track back from the times that the plantation industry was nationalised in the 1970s, when it came under government control it went on in the 1980s to make a bold decision to make the Colombo auction control the global demand chain by breaking away from the great London auction system which has held ground for many a year.
Today the Colombo Stock Exchange commands the highest values for tea globally.
In the 1990s the supply chain was privatised for private sector management companies which gave the opportunity for new thinking to be introduced to the industry with strong R&D power and capital infusion that resulted in Sri Lanka becoming the best performing country globally for value addition tea, commanding 43%, and it now registers a better performance.
Today, Ceylon tea has taken the high ground with some focused decisions on conforming with global standards on MRL levels and has gone further by developing a new standard for tea which has resulted in Ceylon tea being the first certified ozone-friendly tea globally, something which no other tea producer has received. With the certification of the Rainforest Alliance, the dollar price premium takes hold in the global market, which is essentially the commercial benefit from the ethical positioning that the apparel industry must follow.
Apparel - tell the world
The apparel industry, which is registering a 5.2% decline as at July 2017, is targeting $ 7.5 billion revenue for Sri Lanka in the years to come.
What is noteworthy is that even though Sri Lanka does not produce yarn, the apparel industry, which was essentially termed a tailoring industry way back in the 1980s, has now transformed itself into an innovator on the world stage with an almost 80% value addition and is driving a global proposition of ‘Garments without Guilt’ which has positioned the country as the ‘Sustainable Fashion Capital of the World’.
In fact it is the world’s first ethically sourcing destination globally but has not yet communicated this globally to command a premium price in the way our tea has done. Given the revelation of the 41 million fake goods crossing the EU boarder last year and China being the biggest offender, maybe it is time to highlight the high ethical standards that Sri Lanka adheres to and thereby drive stronger penetration of Sri Lankan merchandise to the EU.
Hence we see that while Sri Lanka is experiencing a challenging time there are opportunities in the global marketplace for it to take the higher ground and thereby drive a stronger agenda as discussed.
What is now required is to develop a sharp action program in the 2025 policy guideline launched by the political hierarchy and thereafter aggressively implement it at the ground level. Maybe some of the ideas shared above can be included.
(The writer has worked for top multinationals for 17 years and thereafter went on to serve Sri Lanka as Chairman of Sri Lanka Exports and Tourism before moving on to work for the United Nations. He is an alumnus of the Harvard Kennedy Executive Education program. The thoughts expressed in this article are strictly his personal views).