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| Sunday, 30 November 2003 |
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Cheap Chinese products hamper local exports : Facing the music by Hiran H. Senewiratne A leading musical instrument manufacturing company in the country, Ocean Music Company Ltd (OMCL), complains that its exports have dropped by 50 per cent due to high production costs. OMCL is one of the few musical instrument companies in the country manufacturing violins, violas, cellos and double basses to the export market. The company was initially exporting most of its products to countries like the USA, Australia, Korea, UK and Thailand, but now exports only to the US. According to OMCL, its turnover has dropped by 50 per cent due to limited export orders during the last few years. In 2001, the turnover was Rs 43 million, but the 2003 unaudited figures show a turnover of only Rs 19 million. With the entry of Chinese low cost products to the global market from 2001, many Sri Lankan companies are struggling to keep potential markets with them. OMCL is one such company competing with low cost Chinese products. OMCL is now gradually losing even the US market to China as most Chinese products are almost half their price, OMCL Chairman, Palitha Ganegoda said. "Our exports have been affected due to the high cost of production," he said. He said the company is having stocks worth Rs 10 million which are not moving, due to cheap Chinese products. He said energy costs and labour costs, which have a direct bearing on production costs, are comparatively high compared to other countries in the region. Ganegoda said after the company's establishment in 1996 with a Korean partner, it started exporting products to many countries, but now these markets are dominated by Chinese products. Sri Lanka is no longer a cheap country to do business due to the high cost of production, he added. He also said that the tax holiday the company presently enjoys as a Board of Investment venture, will expire towards the end of this year. Ganegoda explained that the cost of a Chinese full outfit is equivalent to the cost of production in Sri Lanka. He said the company had lost US$ 100,000 by way of replacements made to buyers due to poor handling at the port. OMCL was initially manufacturing 750 units per month, but production has now gone down to 300-350 units due to the slow movement of stocks. However, due to this backlog, the working strength of the company has gone down to 62 from 200. Most of its staff were trained under a German technician, he added. As a marketing tactic, OMCL is looking at the possibility of catering to upmarket clients in the USA by manufacturing hand-made musical instruments, he added. |
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