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| Sunday, 2 February 2003 |
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Business alert for Gulf war fall-out by DEEPAL WARNAKULASURIYA & DON ASOKA WIJEWARDENA Both the Government as well as the business community are alert for severe economic repercussions if war breaks out in the Persian Gulf and plans are already being made to meet every contingency, the Sunday Observer learns. Industry leaders predict that if war starts, exports will be seriously affected and a rise in shipping costs, oil prices and war risk premia will be inevitable. This will lead to price increases of all goods and services. Remittances from the Middle East will also decrease, leading to lower foreign reserves. Minister of Employment and Labour Mahinda Samarasinghe said: "I don't think there will be war, but we have plans to evacuate our migrant workers in Iraq's neighbouring countries if it occurs." Minister Laxman Yapa Abyewardena will visit Iraq, Saudi Arabia and Kuwait on February 8 to obtain details on Lankans employed in those countries. About 1,000 Sri Lankans are working illegally in Iraq, while around 300,000 and 200,000 work in Saudi Arabia and Kuwait respectively. "I prepared a contingency plan to evacuate Lankans four months ago. The real threat is destabilisation of oil prices which can drastically affect our economy," Minister Samarasinghe said. Assisting Foreign Affairs Minister Lal Dharmapriya Gamage said that Sri Lankan missions in the Middle East have been informed about ensuring the safety and welfare of Lankans if there is a war. He said that official information about Sri Lankans in the region will be collected to help them in a crisis. Kuwait had already drawn up plans to evacuate people from areas which could be affected and to look after them in case of war. "We, with the Ministry of Finance, are examining the possibility of granting tax concessions for a specific period for migrant workers to send their valuables back to Sri Lanka without considering their contract periods," he said. Chairman Sri Lanka Bureau of Foreign Employment Susantha Fernando said that though the Bureau is ready to repatriate employees on its account, the solution should be a collaborative process with the Government. Patrick Amerasinghe, Immediate Past President, National Chamber of Exporters said there will be a big impact on exports and shipping with price hikes and low foreign remittances due to Middle East workers being affected which will have serious economic repercussions for the country. "The Government should start preparing the country to face such an eventuality. A crisis plan should be prepared and discussed with the private sector as every business will be badly affected," he said. Ishan Fernando, Managing Director Forbes Tea Brokers said that buyers are already adopting a 'wait and see' policy which has mostly affected low growns. Middle Eastern importers do not want to execute their earlier orders and are not placing new orders. At recent auctions, around 15-20 per cent of low growns were left unsold, which is around five per cent under normal circumstances. He said a continuation of this trend could pose warehouse problems due to stagnant stocks. Fernando said private tea factory owners are lobbying with the Government for concessions to face this situation. On previous occasions, the Government initiated a separate line of credit to tide over the crisis. A senior executive from the Ceylon Petroleum Corporation said: "There are signs of war, but we do not think a war would come." However, he warned users to be careful and keep their tanks full. Maxwell De Silva, Chairman Institute of Chartered Ship Brokers said that in an impending emergency like this, we are at the mercy of foreign shipping lines since Sri Lanka does not have a national carrier. Insurance underwriters are watching the situation and as soon as the US declares war, will declare the Gulf region as a war zone and introduce a high war risk premium. The premium will be around 300-400 per cent higher than normal charges and will result in shipping and bunker costs going up. This will have a snowballing effect on our economy as opportunities for exporters to go to inner and upper Gulf regions will be restricted, which will result in them having to find alternative markets. A Rubber Cluster spokesman said there will be another rubber price hike if war starts as production of synthetic rubber will decrease due to high oil prices. Consequently, natural rubber prices will go up. |
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