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Bilateral agreement 'tween Indian & Sri Lanka
Chamber of Industries highly concernedThe Ceylon National Chamber of Industries has become highly concerned over the effects the bilateral agreement between India and Sri Lanka will have on local products.
One of the fears expressed by the chamber is the possibility of price controls that will be brought on local products while there will be no such restrictions on imports from India.
The chamber in a press release says:
The above trade Agreement has been signed and it is to be welcomed provided adequate safeguards to industry and thereby employment are ensured. If the agreement facilitates, the entry into Sri Lanka of lower priced raw materials, machinery and spare parts it will be appreciated.
The concerns of Industry may be broadly categorised as follows:
(a) Criteria for Negative Lists
Whilst there has been a measure of consultation between the Ministry of Industrial Development and the Ceylon National Chamber of Industries, we have by no means been assured that the products that need to be protected will be taken into account. Industrialists are thereby in a quandary and the lack of transparency has caused much heartbreak and even despair. No clear criteria have been laid down for the selection of the Sri Lankan negative and preference lists.
(b) Subsidies
The Indian Government has had a consistent policy of subsidising many areas of exports and the agreement does not appear to exclude these. This can be interpreted as a form of dumping of goods and whilst India has anti dumping laws in place, Sri Lanka has no such barrier. India is also known to subsidise its small and medium industrial sectors in infrastructure costs such as electricity etc. A level playing field therefore does not exist at present and is unlikely to exist in the near future.
(c) Impact of zero duties on finished products
Wherever zero duties have been imposed on Sri Lankan products as in the case of pharmaceuticals and textiles, closure of industries and large scale unemployment were the result. This is likely to be the case in many areas of industry that will be liberalised. In the case of products not manufactured in Sri Lanka no start up is likely to occur if duties are zero rated.
(d) Non Tariff Barriers
In addition to the normal Customs Duties, Auxiliary duties are known to be charged by Indian Customs. Also there are inter-state levies, unlike in the case of Sri Lanka and there has been no agreement to eliminate these. The removal of non tariff barriers is not stipulated in the agreement and we can only hope that these will be implemented in good faith.
(e) Harmonising of H. S. Codes
The term ‘’item’’ has not been defined. Products are often divided under the Indian HS Code classification up to ten digits so that an item as understood by Sri Lanka would constitute a single product could be subdivided by India as several products and so incorporated in their preference lists. This creates an illusion that India is granting more items for concession.
(f) Institutional Safeguards
Where quality standards are concerned, the Sri Lanka Standards Institute openly states that it lacks the facilities to examine a broad spectrum of products for quality and where price is the main market determinant, goods produced cheaply under economies of scale will swamp local industrial products as quality cannot be examined.
(g) Disparities in Tariffs
Indian Customs and excise tariffs are generally higher at present than the Sri Lanka customs tariffs for a given item. Hence, even where a preference is given, the tariffs of India may not reduce to those below Sri Lanka
(H) Value Additions
Under the Rules of origin very few Sri Lanka industrial products are classified with a minimum 35% value addition in its exports price. This is because Sri Lanka lacks sufficient backward integration in industry.
(i) Price Controls on local Industry
Sri Lanka Trade Ministry is actively known at present to be pursuing revisions to the Consumer Protection Act which can result in price control of any items of Sri Lanka merchandise. This law if it comes into effect will only affect products manufactured in Sri Lanka as the Fair Trading Commission has no means at all to check the costs of an item produced abroad to find out whether it is reasonable or not. Hence Sri Lanka products will be held up in go downs for months while the costs are examined while the Indian products will sail through and enter the market place at high prices for the reasons stated above. The consumer will have to purchase the high priced imported products as the lower priced Sri Lanka products will not be permitted in the market place.
(j) We have all observed the catastrophe that befell several sectors of Agriculture with the liberalization of imports in that area from time to time. The impact on farmer livelihood was disastrous.
Industry caters to the employment of educated youth. Industry also remains a main avenue of employment for several hundred thousand school leavers each year.
A situation where mass unemployment results from the free imports of Industrial products is too frightening to contemplate.
Namunukula Plantations IPO oversubscribed
The Namunukula Plantations Company initial public offer IPO which opened on December 31, last year, closed on Tuesday last week being fully subscribed.
According to Waldock Mackenzie, Managers to the issue, there had been 5431 applications with a value of Rs: 61,561,500. Despite the very slow interest shown by investors initially the IPO was oversubscribed by Rs: 1,561,500 at close.
A Waldock Mackenzie spokesman told ‘The Island’ that applicants for under 10,000 shares would get the full number of shares applied for.
The share issue was for 4 million shares at Rs: 15 each with a premium of Rs. 5. It was felt at the outset that investor interest would not be forthcoming in view of the change of profitability in the company.
In addition the downward trend in Plantation shares started with Kahawatta plantations despite the interest shown in the earlier issues.
Although stock prices at the CSE continues to be low in respect of the plantation sector the tea industry is said to be recovering from the turmoil in Russia. Much hope is being kept on the Iraq tender.
Namunukula is expected to do well in the long run since John Keels has invested considerably in the company. Besides, tea prices are expected to go up in the new year.
