From left: EASL AGM Committee Chairman Talal Shums, EASL Chairman Fazal Mushin, Finance Minister Ravi Karunanayake, Ceylon Chamber of Commerce Chairman Samantha Ranatunga, EASL First Vice Chairman Harin de Silva, EASL Second Vice Chairman Chrisso de Mel, EASL Secretary Manori Dissanayaka

By Chandeepa Wettasinghe
The duplication of ministry and government agency functions related to trade has created confusion and complacency in the country’s exports, Sri Lanka’s exporters said during their industry body’s annual general meeting last week. 

 “Red tape and overlapping of functions of several ministries, several strategic initiatives being taken over by several agencies on the same topic of trade and strategic policy has created an environment of confusion and inconsistency,” Exporters’ Association of Sri Lanka (EASL) Chairman Fazal Mushin said. The National Policies and Economic Affairs Ministry, Development Strategies and International Trade Ministry, Foreign Affairs Ministry and the Ministry of Finance all talk about developing trade and trade agreements, even though de jure power lies with the Industry and Commerce Ministry.

Government agencies related to trade have been divided among most of these ministries, and new agencies have also been created in order to give power to politicians and government supporters, often resulting in inter-agency power struggles instead of cooperation.

When duplicate ministries were being created last September, recently appointed Central Bank Governor Dr. Indrajit Coomaraswamy had told Mirror Business that such an act may have wide macroeconomic implications.

Mushin noted that this large collection of government officials are not in a positive thinking, proactive or even a business as usual mode, as they are pondering the fallouts of government debt servicing, a slow global economy, disasters and phenomena such as Brexit.

“These challenges are not exclusive to Sri Lanka. Whilst we ponder on the downside and fallouts etc., our neighbouring countries are outsmarting us and have faster growth rates, whilst we are running around like headless chicken,” he said.

He recommended that Sri Lanka learn from its neighbours, and go on to diversify both products and export destinations.

While Mushin noted that most ministers and officials had given time to listen to export sector stakeholders unlike in the past, and the Prime Minister’s economic policy statement had included the key elements of the EASL’s whitepaper ‘Recommendations for a National Export Strategy’, it must be converted to action.

“What we need is a political policy agreed by all coalition partners of government, accountability of ministries and more importantly, make the Prime Minister’s policy statement to be the driving vision of this country,” he said.

He added that the various export associations affiliated with different business chambers will unite to push the agenda for export development in the future.

“We have been silent far too long and been politically correct. It’s time we all spoke with one voice and be the drivers of the country,” he said.

Sri Lanka’s exports as a percentage of Gross Domestic Product declined to 12.76 percent in 2015 compared to 33 percent in 2000 due to increasing protectionism leading to a lack of global competitiveness.

Even the chauvinistic politicians that led the Brexit campaign have now become moderate in their views of isolation and protectionism due to effects it will have on their economy.

Govt. wants exports to hit 40% of GDP

The government would like the country’s exports to increase to 40 percent of the Gross Domestic Product (GDP) with greater private sector involvement, Finance Minister Ravi Karunanayake said at the Sri Lanka Exporters’ Association (SLEA) AGM.

“Exports should get back to 40 percent of GDP before too long,” he said.
He added that small and medium-sized enterprises and the informal sector have not responded to 
recent government efforts to rectify the ‘appalling’ exports scenario.

Sri Lanka’s exports declined to 12.76 percent of GDP in 2015 compared to 33 percent of GDP in 2000.

Karunanayake asked the private sector to get involved since the government is creating Free Trade Agreements (FTAs).

“We will open up markets. Don’t worry of FTAs bringing in imports. Focus on the potential of value-added exports that is there. I don’t mind even cow dung being exported as long as it is value-added,” he said.

However, it appears that certain protectionist practices that were intensified under the previous regime are likely to continue. 

“We’re responding to exporters in a big way, where in many areas, cess have come into ensure that we stop imports coming in and get exports going out,” Karunanayake said.

He was making the comments exactly a year after pledging to remove protectionist barriers during the Sri Lanka Economic Summit of the Ceylon Chamber of Commerce—the edition for this year is set to take place next week.

Prime Minister Ranil Wickremesinghe too at the same event had said that those seeking protectionism are pseudo nationalists who are blocking the country’s development.

Economists, including Foreign Affairs Deputy Minister Dr. Harsha de Silva have stressed that imports and exports are two sides of the same coin in the current globalized world with international supply chains.

Low imports for production results in more competitive prices for exporters. The Sri Lanka Apparel Exporters Association—which represents the country’s largest export industry—had last November expressed its concerns over the increases to import tariffs proposed in the budget.

SLEA Chairman Fazal Mushin called for the government to help in reducing input costs in order to increase competitiveness of the country’s exports 
as well.

Lower import costs, in addition to lowering inflation as required under the International Monetary Fund’s extended fund facility, also help to increase the local competitiveness by making industries push for the adoption of better technologies and economies of scale.

However, high taxes on imports to Sri Lanka’s import-dependent economy continue to make local industries complacent while accruing funds to the country’s cash strapped Treasury.

Despite the drawbacks of protectionism, a bright spot may be the consistency in this regard, compared to wildly varying policies seen in the recent months, of which Karunanayake said that he ‘regrets the unprofessionalism and inconsistency, which was out of our hands’.

EXIM Bank to be set up soon

The much discussed EXIM (Export-Import) Bank of Sri Lanka will become a reality within the next couple of months, Finance Minister Ravi Karunanayake said. “We’re looking at an export import bank to help the exports to take place more advantageously and more competitively, and this should come to fruition in the next couple of months,” he said.

The EASL had recently released a statement hailing the move, and saying that an EXIM Bank would help increase credit lines to exporters and potential exporters, thereby increasing exports out of the country.

The Commonwealth Secretariat had also said recently that it would assist the creation of an EXIM Bank in Sri Lanka through technical assistance.