EXPORTERS UNITE TO ADDRESS CHALLENGES

The exporter community is advocating for digitalisation and stability – Allaam Ousman reports

As Sri Lanka’s exporters grapple with myriad challenges ranging from tax woes to currency devaluation, urgent calls for government action reverberate throughout the sector.

The National Chamber of Exporters of Sri Lanka (NCE) hosted a joint press conference in early May where seven leading chambers and associations highlighted the challenges that their members face in their export development endeavours.

Speakers representing the apparel, tea, rubber, shipping and IT industries outlined factors affecting the country’s economic development.

“Sri Lankan exporters – despite obstacles – have made significant contributions to the economy through foreign exchange earnings and job creation,” said Shiham Marikar, the Secretary General and CEO of the NCE, in his opening remarks.

The chamber’s President Jayantha Karunaratne opined that transportation inefficiencies and regulatory reforms are imperative to unlock the export sector’s full potential.

In this regard, transportation is a key area of focus, he explained: “The high cost of transportation in Sri Lanka necessitates the utilisation of the existing railway infrastructure, albeit with necessary improvements.”

“Another critical aspect is digitalisation, as many processes still rely on manual operations especially within government offices. We advocate for closer consultation between exporters, businesses and the government to address these challenges collaboratively,” Karunaratne added.

Despite efforts to drive digitalisation, progress has been inconsistent, particularly in customs, Board of Investment (BOI), port and airport operations. The reluctance to embrace digitalisation hampers efficiency and competitiveness, according to Sean Van Dort, the Chairman of the Sri Lanka Shippers’ Council (SLSC).

“During COVID-19, digitalisation gained momentum but we’ve regressed to manual checks. Successive governments lacked the vision for comprehensive digitalisation,” he asserted.

Van Dort explained: “Sri Lanka seems apprehensive about digitalisation. Despite our efforts over the past 15 years – particularly with Sri Lanka Customs – to drive the digitisation of import-export documents, progress has been inconsistent.”

Tea Exporters Association (TEA) Chairman Ganesh Deivanayagam underscored pressing concerns impacting Sri Lanka’s competitiveness in the world market: “The first is the imposition of VAT on tea as a commodity. Imposing an 18 percent value added tax rate on tea, 87 percent of which is exported, poses a significant challenge.”

“While other tea producing nations like India and Kenya maintain lower tax regimes for exports, Sri Lanka has increased corporate taxes to 30 percent, placing an undue burden on our competitiveness and investment capabilities,” he lamented.

Yohan Lawrence, the Secretary General of the Joint Apparel Association Forum Sri Lanka (JAAF), appealed for greater flexibility in banking regulations and VAT refund procedures.

“We have consistently advocated for a stable exchange rate as large fluctuations are detrimental to exporters. Presently, we’re witnessing a rapid depreciation of the Sri Lankan Rupee due to several factors. In light of the current economic context, we strongly advocate for an end to the mandatory conversion requirement,” he urged.

Lawrence also highlighted the impact of electricity pricing for industries, which remains higher than regional counterparts: “Sri Lanka’s electricity cost still exceeds that of countries like Bangladesh and Vietnam by at least 10 percent.”

Sri Lanka Association of Manufacturers and Exporters of Rubber Products (SLAMERP) Chairman Pushpika Janadheera echoed this sentiment: “Despite the rupee’s depreciation, costs remain high, impacting competitiveness.”

“Reasonable energy and water prices are imperative for industry viability. The sudden increase in corporate tax from 14 to 30 percent further strains exporters’ ability to reinvest and remain competitive,” he asserted.

Addressing transportation inefficiencies, enhancing digital infrastructure and reforming outdated labour laws are crucial for industry growth, according to Jehan Perinpanayagam.

The Chairperson of the Sri Lanka Association of Software and Service Companies (SLASSCOM) observed that “the IT-BPM industry has shown remarkable resilience. Our industry has continued to thrive. In 2022, we achieved US$ 1.7 billion in export revenue earnings, providing employment to 144,000 individuals with 35 percent being women.”

Perinpanayagam stated: “We aim to reach five billion dollars in export revenue earnings by 2030. These aspirations are attaina­ble when we consider the staggering figures achieved by countries like India and the Philippines.”