n a recent edition of BENCHMARK, the then newly elected President of the National Chambers of Exporters (NCE) of Sri Lanka, Kingsley Bernard, expressed his frank and forthright views on the future of the export sector. At the outset, Bernard stressed that the need of the hour in the country’s export sector was to improve competitiveness. But he pointed out that the UPFA’s budget has, in a sense, disincentivised the sector by levying taxes on promotional travel and marketing-related activities. Moreover, 50 per cent of advertising expenditure has also been brought under the tax purview.
“These restrictions will be a hindrance to the export sector,” he pointed out. Many of the members of the NCE have raised objections, but are now biding their time to see whether these proposals are implemented eventually, Bernard intimated. He admitted that there is a certain element of scepticism amongst exporters as to whether many of the proposals in the budget will actually be implemented by the government.
And he vociferously declared that “protectionism is a bad word” in his vocabulary, as consumers are then denied a wide choice. “Technology, globalisation and deregulation are the three criteria on which the new world will move ahead into the future. Imposing tariff and non-tariff barriers on the import of goods will deny consumers certain goods. Moreover, this could also mean that certain inefficient industries are incentivised to continue. In fact, competition is a good weapon to improve,” he explained.
Commenting on the revised ports and airport levy that has been proposed in the budget, Bernard said it is better in the long run if the government looks at the bigger picture, beyond immediate revenue generation. “We should reduce such taxes and increase our export volume,” he added. Looking at the costs and benefits before introducing such taxation would be beneficial, he averred.
He rejected the “myth” that exporters are single-mindedly in favour of the devaluation of the rupee. “What we need is a certain level of rupee depreciation, so that we are competitive in the international market. Since our trade deficit is negative, we need to study our internal resources and then maintain a certain rupee level,” he urged. Speaking from personal experience of working with SMEs, Bernard agrees that while it is welcome that the budget supported SMEs, it is important to grasp the fact that SMEs cannot help to achieve growth targets in the short term – an area where large enterprises could play a key role. But he averred that supporting SMEs meant issues such as poverty alleviation could be addressed – and, of course, it also makes for a “good political slogan” to keep the masses happy.
He emphasised that we should not lose sight of the basic objective of improving the country’s economic growth and export development.
Bernard felt that a clear solution to increasing exports was to improve Foreign Direct Investment (FDI). “If I look at the budget, I don’t see much in it about promoting FDI. Unless there is good coordination between the agencies that promote FDI, we cannot get good returns. I feel we need an exclusive body to promote both trade and investment,” he added.
Commenting on criticism regarding what is perceived by some as a skewed Indo-Sri Lanka Free Trade Agreement, Bernard said that one of the stumbling blocks was that products in India were similar to Sri Lanka – unlike, say, the US or the UK.
“We have increased exports to India, although it may not be by as much as we would want. India, too, has invested heavily in Sri Lanka. We need to put our house in order first,” he said.
Looking forward and into the new year, Bernard said that the apparel industry should be upbeat and treat the removal of quotas as a challenge, now that the global market would be open for competition in its entirety. Unfortunately, only some 50 per cent or less of garment manufacturers are up to the challenge. “I hope they are able to help the medium and smaller garment companies along the way,” he concluded.