High cost of production will hamper export growth

Sri Lanka exporters complain that the cost of production on all fronts in all export industries are increasing at a rapid pace due to reasons beyond their control and Sri Lankan exports are loosing their competitiveness in the international markets. Under this situation the country will only be able to achieve a half of the growth planned by the government and declared in the Road Map 2011 by the Central Bank.

Exporters representing all leading export industries in Sri Lanka expressed their views on the challenging situation faced by the industries at a media briefing organised by the Ceylon National Chamber of Exporters last week in Colombo.

The CEO of the Colombo Dock Yard Mangala Yapa explained the difficulty faced by the company. Colombo Dock Yard is the only ship builder in Sri Lanka and 95 percent of its business is export oriented. The company contributes 2 percent of the export revenue of the country.

"We have to be globally competitive and that is the name of the game. The global shipping industry is slowly recovering after the global economic crisis and the future of the ship building industry in Sri Lanka is very challenging. Prior to the global economic crisis ship repairing charges were US$ 5/tonne. Due to intense competition it has now reduced to US$ 2.5/tonne. On the other hand all our input costs are increasing. The electricity tariff introduced recently has increased our cost by Rs. 3/tonne. This has hampered the growth target of the company because without electricity we cannot do ship building", he said.

Yapa said that the government should introduce industry specific electricity charges that should not hamper the export industries. He pointed out that the electricity cost of the Colombo Dock Yard has increased from 17 percent of the total cost last year to 21 percent this year.

The company does not use any local raw material and only uses the skills and expertise its people. Although the private sector uses maximum power efficient methods to save energy it is not so in the public sector. He said that it is unfair to charge that cost of the public sector from the private sector.

Chairman of Royal Fernwood Porcelain Jagath Peiris said that several issues have hit the porcelain industry and Sri Lankan products are loosing their main markets to competitors. Exporters have to bear the increased cost after the abolition of GSP+ trade concession in the EU market.

The rupee appreciation has reduced our revenue. The LP gas price has increased by 40% and as a result the cost of production has increased by 35%. Suspension of US GSP has affected porcelain exports to the USA.

Earlier Sri Lanka exported at zero duty to the US. Electricity charges increase has affected all industries and ironically the industries have to pay two tariffs. With all these cost increases as a result of intense competition in the global market we cannot increase prices and pass the cost to customers, he said.

The founder Chairman of CNCE Patrick Amarasinghe said that all industries in Sri Lanka have faced serious issues due to the number of holidays per year enjoyed by state and private sector employees. Although it is a sensational issue, rationalising the number of holidays is essential to improve productivity. The companies as well as the employees may benefit by such a move, Amarasinghe said.

"President Mahinda Rajapaksa has also understood this situation and he once said that a government employee works only 3 hours and 20 minutes per day. The attitudes of the employees have to be changed. It is difficult to meet a high level government official to get a job done.

How does the private sector work more and improve productivity while the state sector functions that way. We have gone through a very bad period but the private sector survived and performed. A new era has begun but a lot of things obstruct the smooth functioning of businesses", he said.

Amarasinghe said that events such as elections and cricket matches in the coming weeks will have negative impacts on businesses hampering productivity. He emphasised that the attitudes of the workers have to be changed.

Other exporters at the press conference from apparel, fruit and vegetable, sea food, confectionery and fibre boats industries said that high electricity charges introduced by the government to make the CEB a profitable entity will damage industries and the export sector.

GW