Inconsistent policy measures of the Government have left importers in the lurch, without the ability to make informed decisions, accused importers at the recently concluded AGM of the Import Section of the Ceylon Chamber of Commerce.
“The main (adverse) effect comes from local policy framework which we find to be mostly short-term and inconsistent,” the Import Section’s outgoing Chairman Mahesh Wijewardene said.
“Import trade has a direct bearing on the Government’s policy changes, especially import restrictions/duty and tariff revisions/bi-lateral and multi-lateral FTAs and so on. Therefore importers don’t have the much needed assurance to confidently make certain decisions on investments and business expansion strategies. This has always been one of our key concerns.”
Wijewardene noted that tough economic conditions which prevailed from the latter part of 2011 and policy fluctuations have taken a toll on the operations of importers, particularly on vehicle importers.
“General contraction of the economy has made conditions tighter for the import sector, compared with 2010/11. The main impact came from the unprecedented devaluation of the Rupee against the US Dollar. The Rupee was one of the most devalued currencies in the world in 2012. Further, the significant electricity price hike and rising interest rates have made an adverse impact on overall business. Sector-wise the motor trade was badly impacted with the abrupt revisions of import duties, with volumes dropping to as much as 50%.”
The Government should be mindful of the contribution made by the importers to the local economy, Wijewardene stressed.
“It is important to note that Sri Lanka is still an import-led economy and the role of importers continues to be significant and is vital for the economy to sustain its stability and enhance its long-term growth prospects. It is observed that any developing economy in its early stages record import-driven or import-intensive growth.”
He noted that the contribution of imports to the economy was three fold; through value addition, as a growth facilitator and as a revenue earner.
Total imports rose by more than 50% in 2011, to US$ 20 billion from US$ 13.4 billion in 2010, he revealed. Imports have risen at a slower pace in the first quarter of 2012, at a rate of 12% and a further slowdown is expected in the months ahead as policy measures taken by the Government to curb the rising imports bill start to kick in more strongly, he opined.
Apart from the interests of the importers Wijewardene also expressed concern regarding the plight of exports.
“We are worried about the declining trend of exports that put additional pressure on the balance of trade. It is quite evident that Sri Lanka’s export sector has not diversified for decade and has been relying on organic growth of the same product line. We are hopeful that the Government will engage in consultation with the sector representatives and look at more consistent trade and tariff policies, enabling the business sector to invest on more sustainable ventures.”
While being critical of inconsistent policy measures of the Government, Wijewardene also applauded certain import sector-specific initiatives that have been taken in the recent past. Among these measures were the continued development of online customs procedure and online procedure for services provided by public institutions, efforts to obtain international recognition for Sri Lanka accreditation of laboratories and testing facilities and strengthening of the NCED mechanism for dialogue between the Government and the private sector.
Measures to develop infrastructure, particularly with regard to the expediting of port development projects and the construction of expressways were also timely and positive moves that support Sri Lanka’s efforts to become a logistics hub, Wijewardene opined.
“Sri Lanka’s plans or vision of being a logistics hub in 2015 should be aggressively pursued, taking the highly advantageous geographical location of our country into account. Sri Lanka moving up in the logistics sector to the 81st position from the 137th position in the World Bank Logistics Performance Index is ample testimony of the impact of such initiatives.”
To solve issues faced by importers Wijewardene made few suggestions to the policymakers, including the formulation and implementation of a further simplified and consistent duty/tax system for imports and to align Sri Lanka’s tariff structure with those of the other countries in the region, to enhance competitiveness.