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Sunday, 14 February 2016

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Diversify exports to achieve US $ 100 b target - MD and CEO, Lanka Harness

Sri Lanka still lacks major technologically-driven firms to increase export turnover and move towards the target of a US $ 100 billion economy, Managing Director and CEO, Lanka Harness Company (Pvt) Ltd., Rohan Pallewatta told Sunday Observe Business.

He stressed the importance of achieving a US $ 100 billion economy if the country is to attract large foreign direct investments. Although Sri Lanka lacks the capacity being a small country, it has the best workforce in the world.

“Sri Lankans can be trained easily as they are keen to excel in life. This is why they are the best workforce in the world,” Pallewatta said. Economists have reiterated the need for Sri Lanka to diversify instead of focusing only on traditional exports.

At the recent Sri Lanka Economic Forum, Prof. Ricardo Hausemann underscored the importance of diversifying exports with a colour illustration of Sri Lanka’s exports from 1994 to-date and pointed out that it has not changed.

“We need to go beyond conventional exports to technological products as some South East Asian countries which have leapfrogged in economic growth due to its focus on the manufacture of technological products.

Lanka which was ahead of Singapore, Malaysia and Thailand is today way behind them in terms of technological advancement,” Pallewatta said.

A major share of export revenue in Japan, Korea, Singapore and Malaysia comes from the export of technological products. Japan has made great strides to be a leading exporter of automobiles in the world. Sri Lanka’s exports of electronic products count less than one percent.

Pallewatta said technology-driven industries contribute a major share to economic growth in many East Asian countries from whom we need to take a cue and develop exports to reach the targets envisaged by the government.

Exports of electronic products are around 90-95 percent of total exports in Japan, 85 percent in Korea, 50 percent in Malaysia and around 27 percent in Thailand.

‘We must recognise the contribution of garment exports to the economy. However, there is no concerted effort being made by policymakers to introduce new technology with the support of the private sector. The future is nano and bio technology. The fusion of the two technologies is vital to expand exports.

Pallewatta said the setting up of an assembly plant in Sri Lanka by Volkswagen has been rhetoric so far with nothing taking place on the ground. The investment of around US$ 30 million is peanuts for an automobile assembly plant by a global company. There is nothing much that could be done with such a small investment. Tata Nano invested US$ 1.2 billion to buy a plant in Sri Lanka.

China has invested around US$ 9 billion in Sri Lanka, a large component compared to its investments in other countries. However, the China funded Port City Project was stalled due to environmental concerns. There are many misconceptions that it would be a military base for China and that Colombo will have less sunshine due to the skyscrapers of the Port City. We have conveyed a wrong signal to the international investors who will have second thoughts about coming to Sri Lanka.

‘We need consistent and stable policies with a political and business will going hand in hand.

“A Chief Minister of Tamil Nadu visited Toyota 26 times to get them to come to India. I invited Toyota to set up a plant in Sri Lanka in 2007. I have been speaking to them since 2002 when they were looking for a place to set up Daihatsu acquired by Toyota. It was estimated that only around 1,000 units could be sold a month in Sri lanks whereas 40,000 units could be sold in Indonesia. The next question was the amount of value addition that could be done in Sri Lanka which was around 30 percent whereas in Indonesia it was around 60 percent”, he said.

Pallewatta said he was disheartened to see Sri Lanka not having a big global company. Value addition is not the only criteria. Going for niche products that would have a large market share is vital, he said.

Lanka Harness manufactures impact sensor switches for seat belts and air bags for world-renowned automobile brands. It adheres to a very strict quality standard where the defect tolerance rate is one part per million.

“When I embarked on this venture I was told by many that with the existing work ethics in the country I will not be able to achieve this level of quality. But looking at the great monuments built by our ancestors and the precision work that they had undertaken 2,000 years ago I thought that this DNA must be somewhere in our people. This provided the leadership to rekindle this DNA.

It is estimated that there are around one million trishaw drivers in the country who are mainly youth who account for a major share of the workforce. BOI companies have around 100,000 vacancies but they find it difficult to recruit people due to the sub culture created by trishaw drivers. They do not want to change their ways. It is a strain on the economy due to the large number of trishaw and fuel imported each year.

He said Sri Lanka is losing billions of foreign exchange as expatriates use the Havala and Undial systems to channel money through a known party in the country.

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