Four dimensions to imports role in GDP growth - Dr. Saman Kelegama

by Gayan Kanchana

Mahinda Chinthana Idiri Dakma aims at an eight percent growth rate.

This can come by improving the ‘doing business’ environment in Sri Lanka, bringing down the incremental capital output ratio (ICOR) from 5 to 4 and increasing investment to 32 percent GDP,” said Executive Director Institute of Policy Studies Dr. Saman Kelegama speaking at the 75th Annual General Meeting of the import sector of the Ceylon Chamber of Commerce (CCC) held last week.

Dr. Saman Kelegama

Dr. Kelegama said that there were four broad issues relevant to the import sector in Sri Lanka viz. the position of imports in the economy, import as a value adder to the economy, imports as a revenue earner to the economy and imports as a growth facilitator in the economy.

At present imports amount to US$ 12 billion and exports to US$ 8 billion which accounts for 30 percent and 20 percent of GDP. If we add the service trade to imports and exports then imports will amount to 38 percent of GDP and exports will amount to 24 percent of GDP,” he said.

Dr. Kelegama said: “Import liberalization can also be a source of value addition. For instance, assembly operation for completely knocked down imports.

One can import components of motor vehicles, three wheelers or refrigerators and assemble them with some value addition to sell in the domestic market.

The value addition will be small but if the operation takes place in a large scale the value addition will be also bigger.

Import as a source of revenue at the time of independence was 6.2 percent of GDP, today it contributes to around 2 percent GDP revenue.

Currently investment per GDP is at 24 percent and thus an 8 percent GDP increase of investment is required 4 percent will have to come from FDI remaining 4 percent GDP increase in investment in private sector. If investment cannot meet these targets we will have to look at a combination led growth and investment led growth”, he said.

CCC Imports Chairman Mahesh Wijewardene said “Imports Section of the CCC consists of over 100 member companies and functions directly as one of the Trade Sections of the CCC. We follow our vision to be the most influential and effective voice of the importers in the business community.

We welcome the government’s recent move effecting changes by reduction in applicable duty and tax rates in many sectors and also complete removal of certain tariff lines that would certainly benefit the importers across sectors We have experienced similar reductions previously as well but they were short lived, under government’s revenue generating pressure.

Whilst applauding this positive move, we hope that this will be a step taken with a long term perspective giving confidence for businesses to make long-term decisions without much hesitation”, said Wijewardena.