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| Sunday, 30 March 2003 |
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| News Business Features Editorial
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Turbulent Times ahead for Exporters The Indian Ocean Rim Association for Regional Co-operation (IOR-ARC)and IOR Business Forum (IOR-BF)meetings, scheduled from March 29-April 3 have been postponed. A spoksman for the National Chamber of Commerce of Sri Lanka organisers of the IOR-ARC said that at present discussions are on to fix a new date but it will take some time as it involves the participation and consent of all member countries. The ten day old Iraqi war is starting to have an impact on the Sri Lankan economy. Already 45 percent of the low grown teas were left unsold at the recent auction. Additional charge of one dollar on freight too is affecting the exporters as it results in increased costs. In the evnt the war drags on it will affect garment sales as well as delivery times. The government together with the Ministry of Plantation Industry has announced a relief scheme for a period of two months. It includes storage space for tea stocks which do not move in the auctions and increase of the limit for packing credit from 90 days to 120 days. Tea Minister of Plantation Industries Lakshman Kiriella, in a Cabinet Memorandum, states that there is storage capacity of 126,798 square feet at the JEDB/SLSPC warehouses and that this storage space could be allocated to traders on request and the cost will be reimbursed with the CESS funds. The Ministry has taken steps to provide a concessionary interest subsidy for factory owners for working capital loans. This scheme is implemented purely based on the creditworthiness of the factory owners who will be selected by the banks. The Minister has also said that the Government is unable to comply with the requests of the industry to withdraw the co-lateral requirement and the provision of the Treasury Guarantee. He has also proposed that the production of the tea small holders should be pruned down by one third and they be given compensation for the income foregone with the objective of decreasing production in the short-term and the quality in the long-term, the Memorandum said. The cost of the scheme will be borne by the Tea Cess Fund. MD Forbes Tea brokers and Colombo Tea Brokers Association Chairman Yshan Fernando, said at the first auctions after the start of the war, low grown teas were the most affected. Around 40 -45 percent of the teas brought for the auction remained unsold while there was also a drop in prices ranging from Rs 15-20. In the high grown teas there was a drop in the lower end amounting to a 20 percent drop in volume. A small selection of quality teas sold well, he added. The situation in Iraq together with a drop in Quality and the seasonal demand drop are the factors for the drop in demand for high grown teas at the recent auction. Fernando said that the banks are looking at the possibility of extending the concessions but it will be evaluated on a case by case basis. If the producer loses due to the present crisis, the bank will extend concessions. International Marketing Manager of Dilmah, Roshan Tissaaratchy, said: "At present we have not felt a major impact as we don't export bulk tea and low value tea. "We have a distributor in Kuwait who is still operational and also we don't send any shipments on credit. Dilmah always requests the distributor to open a letter of Credit or advance payments. Therfore we are well covered." If the situation continues, the freight rates will increase if a war risk insurance is levied, and also as the routes are deviated, the delivery time will increase. Also if the number of tourists who visit the UAE drops ,it will be a blow to our sales he added. Garments Chairman, Mast Lanka Ashroff Omar, said: "we hve not had a major impact yet, but if it continues for a long time, it will affect the sales. At present the only problem is, air freight as flights have been cancelled and also cargo is off loaded due to lack of space. Therefore, there will be a backlog and also we won't be able to deliver on time." Chairman Creations (Pvt.) Ltd Lyn Fernando, said: "The demand for garments in the US market was getting softer during the last year and the present situation has worsened it further." There were not very many orders coming and the present situation will worsen it. There was some business in the Middle East but if it continues, this too will come to a stop. "At present we are working very hard to implement the five year plan for the apparel sector so that we can face the challenges competing with other countries after year 2005 Chairman, National Chamber of Exporters (NCE) Felix Yahampath, said:" We are having talks with government authorities to get some assistance for the tea sector which has suffered a setback due to the war in Iraq." The banks are not helping the tea sector, he said. Perishables "Compared to the neighbouring countries our energy costs are very high while labour too is costly. Yarn too has to be imported by paying VAT at 20 percent. As a result the handloom sector is suffering and if freight charges increase it will be another blow to the already ailing handloom sector," Yahampath said. Yahampath said that if the war continued the garments sector too will get affected as the airlines would increase the freight charges. CEO and Director Tess Agro, Dilshan Fernando, said: " At present we don't have a problem as all our fruits, vegetables and fish are exported to Europe, but we may have problems if the war continues." "All our cargo to Europe is air freighted while cargo to the South East Asian region is sent by sea." Most of the cargo is air freighted and the airlines we deal have given us the same rate as we are regular customers while some exporters have to pay a higher freight rate, around one dollar extra to send the cargo. SLECIC "Upto now there have been no reduction in orders as well, instead we are catering to a 40 percent increase in orders. Tess Agro Ltd is the number one exporter of Fruits, vegetables and fish to Europe Chairman Sri Lanka Export Credit Insurance Corporation (SLECIC) Hemaka de Alwis, said that a 'war-risk' surcharge would not be imposed on exports to the Middle East market therefore they can export under the existing terms and conditions of the SLECIC cover. The SLECIC management, decided on this move on a special directive given by the Minister of Commerce Ravi Karunanayake in consultation with Prime Minister Ranil Wickremesinghe in an effort to provide exporters and banks with the much needed reassurance, decided not to burden the already 'badly-hit' exporters with any further costs. It is our experience that "Turbulent times, at times are also great opportunities for new market penetration. Therefore, SLECIC anticipates that Sri Lankan exporters will make this an opportunity to establish themselves firmly in the Middle East market when existing suppliers to these markets are backing out due to lack of support from their insurers," he said. |
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