Business


27th July 1997

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Downer for Down Under trade

The relative structure of Australian and Sri Lankan economies indicated a much higher potential for trade than was actually reflected in trade patterns, visiting Australian Foreign Minister Alexander Downer said in Colombo.

"The potential trade complementarities between our two countries had not yet been reflected in actual trade patterns," Minister Downer said.

Australia's share of total commodity imports by Sri Lanka, and the share of Sri Lankan exports to Australia in total Sri Lankan exports had in fact declined over the years."

In the 1960's about 5 per cent of Sri Lanka's imports had come from Australia, but now it had come down to about 1 per cent.

"So there are areas we could do better."

Minister Downer was speaking at the launch of the research study, 'Cultivating the Pearl : Australia's Economic Relations with Sri Lanka,' published by the Institute of Policy Studies.

Last year however imports from Australia had almost doubled to Rs 230 mn.

There were also other factors pointing to increased trading volumes with Australia.

"Sri Lanka today is a member of the South Asian regional trading bloc," IPS chief Dr. Saman Kelegama said.

"As activities within this region expand we will see the trade and investment linkages between the two countries grow faster than under normal circumstances."

Sri Lankan was importing meat, milk, milk products. Sri Lanka was considered an attractive market for raw materials, machinery and transport equipment.

Sri Lanka was already the largest source of activated carbon to Australia.

"There are growing market opportunities for Sri Lankan labour intensive manufactured products in Australia," Dr. Kelegama said.

In the area of direct investment however Australia was already a major player.

"In investment relations, the structure is much closer to what one might expect given the complementarities between our two economies," Minister Downer said.

Australian companies were engaged in making surgical gloves, furniture, electrical accessories rubber products, terra cotta artifacts mainly for the export market.

Starting from 1980 more than 60 Australian direct investments in the country had been approved. In 1996 4271 persons were employed in Australian companies.

Australia was now the second largest foreign direct investor in Sri Lanka and the largest from among the developed nations.

A survey found that most Australian companies were planning expansion drive in the next two years.

"Australian companies are well placed with advanced technology, wide experience and management expertise to assist in projects to solve some of the infrastructure bottlenecks in your country," Minister Downer said.


Storm over tea deal

By Mel Gunasekera

The proposed tea-for-oil deal between Iraq and Sri Lanka has run into a storm with the top ministerial mission to Iraq being put on hold.

A negotiation team led by Trade Minister Kingsley Wickremaratne, representatives from the Ceylon Petroleum Corporation, the Plantations Ministry and the chairman of the Sri Lanka Tea Board Clifford Ratwatte was due to leave for Iraq next week.

Iraq was a major buyer of Lanka tea before the Gulf War and the subsequent trade sanctions disrupted trade between the two countries, Mr. Ratwatte told jouranlists.

"They even had their own buying house in Sri Lanka," he recalled.

On a request made to the Iraqi High Commissioner by Mr. Ratwatte, the High Commissioner had stated that Iraq would be pleased to resume trade, but a delegation should first visit the country to iron out trade matters.

At present, Iraq is permitted by the UN to sell up to US$ 2 bn worth of oil to purchase humanitarian goods.

"Iraq is also a major oil supplier, and there are indications that they would like to trade part of their oil for our teas," Mr.Ratwatte said.

A representative from the Ceylon Petroleum Corporation has been included in the delegation in case the need for such an exchange arises to check the quality and suitability of oil.

Mr. Ratwatte said the proposed transaction was not a barter deal.

However Mr. Ratwatte has expressed confidence that the trade mission would take place.

Mr. Ratwatte was speaking at a press briefing to announce the Sri Lanka Tea Exhibition & Seminar to be held from August 13 to 16.

Sri Lanka produced 258,427 MT of tea in 1996, behind giants like India (778,900 MT), China (609,500 MT) and Kenya (257,200 MT).

"We are the fourth largest producer in the world, from a total 2,691,200 MT produced annually," said Colombo Tea Traders Association Chairman Michael de Zoyza said.

Of this production about 60 per cent is grown by small tea growers, 86 per cent of whon owned less than two acres of land becoming the backbone of the tea industry, Mr de Zoysa said.

In 1996 Sri Lanka lost its leadership as the top tea exporter to Kenya when they exported 244,200 MT against 243,510 MT from our country.

Local tea traders are also hoping to persuade authorities to import more types of teas to blend with local teas for re-export.

At present, exporters are permitted to import 5 per cent of their average total exports under strict supervision of the Tea Board.

When Sri Lankan brands in tea bags compete with global brands like Typhoon and Lipton which are usually packed in the USA or Europe it was necessary to mulit-source different flavours, Mr. de Zoyza said.

"We are asking the Tea Board not to permit the import of secondary, cheap teas, but to bring in quality teas to Sri Lanka to enhance the labour and value added component," Mr. de Zoysa said.


MIND YOUR BUSINESS

By Business Bug

No to hotel

The tourist industry certainly seems to be picking up and the trade expects the annual arrivals target of 400.000 to be reached comfortably. Buoyed by the upturn a leading hotelier on the hillcountry is planning an ambitious expansion programme. Banks however are not very optimistic and several banks have been reluctant to finance the project we hear...

US phone giant

Private telephone networks are the latest addition to the communication industry. One such American - based giant network recently concluded a feasibility study on prospects in the Sri Lankan market. The results have been encouraging and they are due to submit an application to the authorities soon....

Keeping an eye

A leading overseas bank last week launched a special service for customers trying to offer a personalised banking service. A local bank too had similar plans some time ago but the proposal was shelved due to financial and logistical constraints. Executives of this bank are now keenly watching the response to the foreign owned bank and maybe they too will have a change of heart.

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