The proposed China Sri Lanka Free Trade Agreement (CSLFTA) has become a widely spoken topic among the business community today.
It seems that they are helpless in he face of Government’s recent implication through a letter from the Prime Minister’s Office where Cabinet Committee on Economic Management has sought the views of the Department of Commerce on the negative list where they have agreed to reduce it to 10% from the total tariff lines and reach liberalization of 90% within a 20-year period using various options; further the cess will be removed over a period of five years commencing from the fifth year of the CSLFTA coming into force.
Up to now, all governments believed that private sector is the 'engine of growth'.
In fact, during the 30-year civil war almost all the private sector companies carried on their production without major retrenchments.
We have proved our capabilities and resilience during this difficult period. As a result, we could witness success stories of several local industries.
We proudly talk of Sri Lankan heritage, innovativeness, creativity, knowledge and talents of the people as a nation. To get the desired outcome of all such qualities, the private sector needs all the encouragement.
Today, the direction of the Government is not clear and is doubtful. Most of the planned policy matters in the country are not definitely industry friendly.
At a recent news conference organized by the National Council of Sri Lanka (NCSL), Ven. Athuraliye Rathana Thero had said that he had been disappointed that the current trade agreements had been stemmed from the corrupted hearts of individuals and some officials with vested interests.
He had further said that the President had not known about the letter discussed above. The President had, however, assured not to sign any harmful agreement.
On the other hand, the business world is also highly complex in the face of competition and other various internal and external factors.
We know that the strength of the state economy is vastly determined by the success of the local industries on earning and saving of foreign exchange, creating employment and contributing to the GDP.
That is why all governments are taking various measures to protect and promote the local industries.
In this scenario, the decisions taken by the Government in developing the local industrial sector should be clear, visionary and beneficial to the country both in the short term and long term.
It is evident that the wrong strategic thinking of our political front had made heavy losses to our country on many occasions.
One good example is where the Ceylon Petroleum Corporation entered into the hedging contracts. When the world prices of oil were speedily going down, we had still to purchase them at very high prices according to the conditions of the contract.
Violating the conditions made us to pay back billions following a verdict by arbitration. All this foreign exchange wasted.
At the very early stages of the Government coming into power, they wanted to enter into the Comprehensive Economic Partnership Agreement (CEPA) with India for which there were protests and criticism at various levels.
Thereafter, it again came under the name of Economic and Technology Cooperation Agreement (ETCA).
At a time some parties of the business community and other professionals had been indicating their objection for ETCA, the government simultaneously came with the proposed China Sri Lanka FTA.
Now the people have started talking of CSLFTA where the gravity will be more than that of the ETCA.
As far as the population of the two countries are concerned, ours is only around 21 million whereas China has a population of more than 1,388 million.
Why is China so interested in penetrating into our small market consisting of 21 million?
The import value of goods from China (for 02016) was US$ 4,273.58 million against our export to China for the same year which is US$ 199.15 million, only 4.7% of their exports to our country.
Can we increase our production capacities in many sectors?
Can we compete with Chinese products in the face of our high cost of production owing to lack of macroeconomic policies such as interest rates, rupee depreciation, low-scale production, high cost of labour and uneconomical national holidays structure, etc?
In this sense, the only safeguard that local industrialists enjoy at the moment is the cess imposed in 1979.
We, as the National Chamber for Industries, are compelled to play a bigger role to safeguard the industries that survived specially during the 'bad times' of this country.
We must emphasize that we are not against the FTA or going global.
What we request is that the Government not reduce the negative list to 10% from the present level by just neglecting the responsible role played by the local industrialists up to now.
All the Chambers have already agreed to maintain the negative list at 30% level.
Also, we urge not to phase out the cess within a period of five years from the fifth year upon implementation of the proposed FTA, which is the only measure available to safeguard the local industries, where approximately 2.06 million workers are engaged in both the public and private sector industries.
The country is evidently not comfortable in taking up this challenge since there is no healthy environment within our country for a massive growth.
It is important to bring the country to an orderly level first where it will be conducive to the local industries, consumers and the socio-environment.
The problem is about the uncertainties of implementation by establishing proper monitoring and detecting systems.
We have enough experience about lackadaisical approaches. Policy formulation is very easy but what is required is the implementation. Even in the current scenario, poor quality merchandise enters into the Sri Lankan market.
Sri Lanka has an emerging SME sector. Everyone talks about SME development, but very few take a genuine effort in developing SMEs.
Sri Lankan SMEs are discouraged by a lot of barriers. They are not financially sound. They need assistance for low interest and collateral free loans against strong business plans.
They need assistance for research and development, assistance for skills development, technology use, insurance cover, etc.
Similarly, they have to be looked after when their businesses are destroyed or damaged by natural disasters.
Subsequent to the recent floods, there were repeated announcements that the business entities and households had been covered by insurance under the National Insurance Trust Fund (NITF).
One of our SME member companies was severely affected by floods in May 2016 and with our advice the owner applied for compensation with all documentary proofs through the grama niladari and the divisional secretary of the area.
He had then been informed that whatever the value of the damage, the compensation would be subject to a maximum ceiling of Rs. 100,000, whereas the proven damage was above Rs. 500,000.
However, he has not received any compensation as at date despite several reminders and personal visits to the NITF.
After a long and undue lapse of more than one year and the people have been hit by another huge flood.
This is the reality prevailing in our country at present.
Sri Lanka is lacking an industrial policy and standard systems that could boost our economy and restrict imports on quality parameters which are essential to overcome dumping of substandard goods and to curtail unethical business practices.
If these policies and sound monitoring systems are neglected, Sri Lanka might become the dumping ground of South Asia.
We are yet to improve our testing and certifications systems and the anti-dumping practices.
It is also pertinent to note that if the negative list in question will be phased out to 10%, the correspondent loss of income on duty and cess against total government income will be billions of rupees per annum.
In that sense, the outcome of this agreement will be for widening the gap between exports and imports and finally it will affect our balance of payments.
If majority of the Sri Lankan industrialists are against the proposed agreement with China, we are worried whom the Government is going to satisfy.
Sri Lanka which has a very low purchasing power prevailing at the moment is not a big marketplace even for China.
The writer is Chairman, Ceylon National Chamber of Industries
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