"Take benefit of FTA's in present crisis" - Head of economic affairs
Mr Rohantha Athukorala
While addressing the National Conference of the Institute of Chartered Accountants, Mr Rohantha Athukorala, Director of Economic Affairs at the Government Peace Secretariat said that, exports from Sri Lanka are bound to be affected by the current meltdown and the hit could be anywhere in the region of US $300-500 million.
He advised the private sector companies to be aggressive in their approach and exploit untapped opportunities of FTA's signed with India and Pakistan and also the forgotten agreement with Thailand to bridge the expected shortfall. He added by saying that the state also had a role to play in mediating and removing non-tariff barriers to reduce the impact of the economic crisis on exports.
He said, as in previous disasters like the severe drought of 2003, Tsunami in 2004 or security related issues of the last few years, the Sri Lankan economy has shown a resilience due to which it could come out of these disasters and has maintained a steady GDP growth rate of 6-7 percent, he expects the economy to survive the test of time this time too.
Delving out figures he said that if one was to make an assessment of the export performance of the first six months of the current year, 59 percent of shipments from the total export income of $3.8 billion came from the US and EU. Of this, exports to the US amounted to $897 million or 23 percent of all exports of which apparel exports totaled to $692 million.
He gravely said that since 77 percent of all export revenues to the US comes from apparel exports, the sector and the economy at large would face a grave risk if consumer spending was to fall in the US. He added by saying that apparel exports to the US had already witnessed a decline of 8.2 percent by the middle of the year and now with this credit crunch hitting the US consumer and now slowly spreading to the EU and the rest of the world, it would surely hit apparel exports from the country.
But he sounded optimistic on exports to the EU when he said that this region accounted for 36 percent of all exports for the first six months of 2008 worth $1.36 billion out of which shipments of apparels contributed 52 percent of that figure, so it was less vulnerable. Infact he said, apparel exports to this region had grown by 16 percent which is an encouraging sign.
On the subject of FTA's he said under the agreement with India, the country could export up to a million pieces of garments which is yet to be utilized. Commenting on the Bangkok agreement he said Sri Lanka has utilized only 5 percent of the available tariff lines and as per the Asia Pacific Trade Agreement (APTA), 12 percent from current exports is eligible for preferential tariffs of which only 5 percent has been availed.
He underscored on the need to provide strategic incentives to selected industries in the upcoming budget rather than meddle with exchange rates to accordingly adjust to inflationary pressures and for the government to intervene if non-tariff barriers are put up in trade with India and APTA country signatories so that the country does not loose out.
However he had a word of caution when he said that performance and situation will have to be monitored continuously given that the impact on the consumer is expected to increase in the near future, the logic being that even with all the rescue packages, if financial reforms are not in place and flow of credit is not increased in the markets it will eventually lead to a slowdown of growth in the country.
Fibre2fashion News Desk - India