Exporters Association of Sri Lanka

No: 50, Nawam Mawatha, Colombo 02, Sri Lanka.

2010 - 2011 Outgoing Chairperson's speech

Our Chief Guest - Hon.Basil Rajapaksa - Minister for Economic Development, Guest of Honour and Keynote Speaker - Mr.Nivard Cabraal - Governor Central Bank of Sri Lanka, Incoming Chairperson - Mrs.Dawn Austin, Other members at the head table, EDB Chairman - Mr.Janaka Ratnayake, Chairman - Ceylon Chamber of Commerce - Dr. Anura Ekanayake and other distinguished invitees, Past Chairmen and Members of EASL

Ladies & Gentlemen,

In the year under review Sri Lanka's economy began to reflect the peace dividend, recording an impressive growth of 8% in 2010. Inflation and interest rates continued to remain low ,with a stable rupee, improved external reserves, fiscal consolidation and positive business and investor sentiment, all contributing to the development of an overall macroeconomic environment conducive to sustainable economic growth. Sri Lanka's graduation to middle income status from the PRGT Eligible Country List by the IMF, and the recent upgrading of sovereign credit rating of the country by international rating agencies, are strong votes of confidence on the Sri Lankan economy and its management.

In this scenario the Export Sector performed very creditably, closing 2010 with a revenue of USD 8.3 bn, a very encouraging 17% over the previous year. What is also noteworthy is that exports regained the 2008 levels which had been the benchmark, following the downturn in 2009. Looking at performance of key sectors against the previous year, major exports, such as tea, increased by 15.6% to USD 1.37 bn with an all time high volume of 314 million kgs, whilst rubber registered significant increases following the high prices received in 2010 and grew by 72% over the previous year. Similarly spices registered an increase of over 50%. Industrial exports also showed an improvement with the major contributor Textiles and Garments achieving growth of 5.2% and a revenue of USD 3.5 bn, notwithstanding the withdrawal of the EU GSP Plus facility and the global economic downturn. Meanwhile ITBPO Services made its mark, coming in as the 5th highest export revenue earner. All these point to the resilience of the export sector, which, overall, registered a strong comeback in 2010, after the adverse performance of the previous year.

It is against this backdrop that the Exporters Association conducted its activities in 2010/11. The key focus was, to facilitate a suitable environment conducive for export growth. This called for addressing two vital areas- ease of doing business and global competitiveness. Our vision is to exceed the USD 20bn Export Target by 2020 and take Sri Lankan exports to a higher level where we can command a premium, rather than be a supplier of intermediate goods- to enhance the image and consumer perception of exports from Sri Lanka, and seek our own identity. The best example is Ceylon tea, and in more recent times, Ceylon Cinnamon, where Sri Lanka caters to over 90% of the world market, and where the country recently obtained its own geographical indication distinguishing it from its competitors.

Whilst playing a part in spearheading the 'way forward' for the country's exports to survive and grow in the fiercely competitive of global market, over the past several years and particularly in the last year, EASL has, worked towards facilitating greater competitiveness and an enabling environment through its various interventions and activities. The 2011 budget submissions highlighted the need for greater value addition, specialization, branding and product and market diversification, spreading the risk so as to avoid over dependence on a few products and markets, especially in view of current global conditions. This is illustrated by our top two exports, tea and garments, which account for 61% of total exports, whilst USA and EU the top export destinations account for 56% of total exports. Whilst these will continue to be key products and markets, and should therefore be maintained, the need is to build up additional products and markets to offset this imbalance. Already 7 key products sectors have been identified by EDB, each having a potential to contribute US$ 1bn to the total export targets and making up, in total, 80% of the total exports. The Exporters Association, through the budget submissions as well as several media communications and discussions, also highlighted the need for greater focus on service exports namely IT and Offshore Outsourcing Services where Sri Lanka enjoys a significant comparative advantage and needs to be expanded. The IT, software, and particularly offshore outsourcing services has the potential to be a US$ 1 bn industry in view of the comparatively low costs and where a quality service can be offered - not just Business Process outsourcing, but also at a higher level, Knowledge Process Outsourcing extending to fields such as Healthcare, Finance, Legal and ICT. In fact it has been reported that Sri Lanka has, in 2010 - 2011 been identified amongst the top 9 countries in the Asia-Pacific region for globally outsourced activities. With advanced economies facing rising costs in the wake of the recession, this provides a very viable opportunity for Sri Lanka to position itself as a low cost source for these processes, also supporting our effort to position ourselves as a knowledge hub. Furthermore, in view of the country's strategic location, services such as cargo handling and trans shipment could be developed as a key foreign exchange earner, especially with Sri Lanka positioning itself as a maritime hub.

With Asia emerging as the economic powerhouse of the future, Sri Lankan exports need to target the region and focus on greater regional trade to achieve higher growth. This would involve expanding Sri Lanka's trade through both bilateral and multi lateral agreements. Focussing on trade expansion with China and India would be to Sri Lanka's benefit, in view of their high consumption patterns, and economic strength, and appropriate strategies need to be developed to capitalize on the concessions granted by the Trade Agreements such as the Indo Lanka FTA, Asia Pacific FTA and other Free Trade Agreements. For example at present, exports to India account for just over 5% of Sri Lanka's total exports although there is significant increase year on year.

In the year under review we continued to highlight certain longstanding areas of concern. In an effort to facilitate and improve the cash flow of exporters, the long outstanding problem of VAT refunds was actively pursued with the Authorities, and we were successful in achieving significant progress with the cooperation of the Department of Inland Revenue. Similarly the Association was successful in resolving the long outstanding payments under the Dahas Diriya scheme as well was the cash payments due to several exporters under the Export Development Reward Scheme. The cooperation of the Ministry of Finance, Ministry of Industries, Ministry of Commerce and EDB must be acknowledged. We look forward to the early resolution of the balance payments.

In view of the need for greater efficiency of the sector, our Association continued to articulate the need for the implementation of e-commerce which calls for transformation of business processing and transacting from manual to electronic medium. These were highlighted in our budget submissions. Meanwhile we welcome the proposed single electronic window at an early date which will facilitate documentation of imports and exports speedily and efficiently. In its interaction with the Authorities and various submissions, EASL also focused on key areas such as support for the SME exporters in view of the pivotal role played by SME's in the economy. We also highlighted the paramount importance to encourage the private sector to explore and harness potential in the newly liberated areas in North and East, as this would lead not only to enhancing our export base and supply capacity, particularly in agricultural products and fisheries, but more importantly, such links would enable speedier economic development of these areas leading to sustainable peace and prosperity.

In the past year EASL has also stressed the need for the integration of the SL economy with the global economy by promoting, financing and facilitating international trade and investment, in addition to the existing trading models, channels and traditional banking sectors with bank loans as the main source of funding. A whole gamut of innovative enabling infrastructures such as corporate bonds, debt markets, financial instruments and commodity futures would enhance exporter performance, enabling easy access to often cheaper and more competitive trading and financing options. We look forward to the proposed Exim bank dedicated to support exports and imports.

In all these activities EASL has maintained a close public private dialogue to achieve our objectives. I must place on record our sincere appreciation to all those government officials and Intuitions , who have given us their ready cooperation, patient hearing and been open to discussion, leading, in many cases, to a successful outcome. In this regard I must recognize the support of the EDB and Chairman MR.JR for his support. The recent 5 year strategy launched by the EDB is timely for the future of exports. We also welcome the appointment of the several Advisory Committees drawn from the pvt sector which gives the opportunity to closely interact with EDB officials in planning and implementing sector strategies. We look forward to the finalization of the National Export_Plan which was initially spearheaded by EASL in partnership with EDB, and which will set the stage for strong growth in exports aimed at 20 bn USD in 2020.

I must also make mention of the support of the Ministry of Finance ,in the submission of the 2011 budget proposals and we are happy to note that a number of proposals were incorporated in the 2011 budget, specifically the facilitation of greater value addition in exports and simplification of the tax structure. This is an indication of the recognition of the government of the vital role played by the exports in achieving econ growth. The co-operation received from the Department of Inland Rev must be mentioned, not only in expediting of outstanding VAT refunds but also building awareness and educating the exporters on various tax issues including the most recent simplified VAT scheme which is greatly welcome,as it aims at overcoming many of the earlier problems faced by the sector with regard to outstand VAT refunds. Our sincere thanks goes to Mrs.Malika Samarasekara Deputy Comminsioner General Dept of Inland Rev and her team of officials, for their tremendous interest and cooperation in this effort. Regular dialogue has also been maintained with the Central Bank, Dept of Commerce and dept of Customs to resolve pressing issues of the exporters. The recently reactivated Exporters Forum by the EDB has also been particularly helpful.

Publicity and promotion for the Sector was carried out through regular media communication as well as the EASL Website, which was relaunched under the leadership of Vice Chairperson Mrs.Dawn Austin.Our awareness building actives were conducted through an ongoing program of workshops and seminars, In this regard. the most recent forum on” the outlook for exports in 2011” where Central Bank Governor ,Mr.Cabraal, addressed the gathering together with leading personalities from the public and pvt sector, was very useful in bring out innovative ideas as well as issues useful in future strategy development. In this context I would like to make a few brief comments on the outlook for exports. Whilst we are looking at a healthy economic outlook for SL in 2011, with an estimated growth of 8.5%, the key challenge for exporters will be the slow pace of global economic recovery particularly in our major markets. The developments in the MENA region and the prevailing debt crisis in the EU and well as the current possible market meltdown if US debt talks fail, are all factors we must be aware of, and the sector needs to gear itself to meet these challenges. Meanwhile, results to date show a strong export performance where against a target of USD 9 bn for 2011, 46% has been achieved in the first 5 months, an indication of the resilience of the export sector and focus by the govt.

I must make special reference of the keen interest and support by our chief guest hon. BR towards the exporters, and the very positive response to address the matters we have raised. Hon. Sir, the export sector, particularly agricultural exports, fisheries, and other export industries in the regions can play a key role in contributing to achieve the much needed social equity, in view of the engagement with the rural population, creating livelihoods and enhancing the quality of life. The 1 million household economy launched by your ministry, aims at achieving this inclusive growth and bridging the urban rural divide. The EASL looks forward to closely interacting with your ministry in this endeavor and enlisting your support to facilitate enhanced export performance through these activities, leading to greater prosperity and progress in the country.

On behalf of EASL may I once again thank our distinguished chief guest, Hon. BR, and our GOH Mr.NC for so graciously accepting out invitation and participating in this important event.We are greatly encouraged by your presence.

I am privileged to have lead the EASL in the last 3 years as its Chairperson..It has been a challenging but very rewarding experience, where EASL has played a significant part in the growth of the export sector. I must recognize the tremendous support and co cooperation received from the managing committee particularly my vice chair mrs DA who was a tower of strength, and with her wealth of experience, shared the burden with me, as well as our committed second vice chairman Rohan D. I welcome on board our long time EXCO member Sarada De Silva as an office bearer. My special thanks go to our distinguished past chairmen Messrs GC, .Muzzamil, Mohan Mendis, and Deepal C for their very valuable guidance and advice. To the CCC, secretary general and especially our own secretariat headed by Irangika Sriwradna and assisted by Manjula, my special thanks. It was a great pleasure to work with you a and I thank you for your support.

Ladies and Gentlemen, "Sri Lanka is today, poised for exponential growth and sustainable progress and development. The peace we yearned, for almost 3 decades and the political stability fundamental for strong economic growth is today a reality. With this firm foundation now in place it is for us as citizens of this country and particularly as the private sector to, in partnership with the Government build on this foundation so the country may realize its true potential to achieve double digit growth, double per capita income, reach middle income status, and most importantly, achieve social equity for all".

Thank you