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Sri Lanka should exploit recent developments in COMESA and increase tea exports to Pakistan, says a top economist.
Dr. Saman Kelegama, executive director at the Institute of Policy Studies (IPS), believes a shift in Kenyan buying of rice from Pakistan to Egypt would be favourable to Sri Lanka.
"Under the COMESA (Common Market for Eastern and Southern Africa) Egypt is selling rice to Kenya in return for tea. We need to exploit these trends and grab the Pakistan tea market," he told a Colombo seminar last week.
The Ceylon Chamber of Commerce organised the seminar to address the expansion of South Asian regional trade with special reference to Pakistan.
Most of the speakers at the session including Commerce Department Director-General, M.G. Hewage spoke on the proposed Free Trade Agreement between Sri Lanka and Pakistan, on the lines of the Indo-Lanka FTA.
Kelegama, detailing the pros and cons of the proposed agreement from an economic viewpoint, said up to 1984 there was a trade surplus with Pakistan but after that there has been a deficit.
Sri Lanka is a leading supplier of copra to Pakistan while ten percent of Sri Lanka's coconut products are sold there. The IPS chief said the FTA would help overcome the least developed country status within SAARC. Sri Lanka has moved up the ladder and is out of this category. It is not entitled to tax breaks within SAARC that at least four countries in the region get as a result of being defined as least developed countries (LDCs).
In 1978, Sri Lanka was Pakistan's biggest tea supplier, accounting for 67 percent of that market, a figure that fell unbelievably to a mere 7.24 percent by 1998.
Pakistan is the third largest tea buyer in the world and is heading for second place status due to a growing illegal tea trade in neighbouring countries via this South Asian country.
Kenya is Pakistan's biggest supplier, benefiting by selling CTC teas which are favoured by Pakistan whereas neighbours like Sri Lanka, India or Indonesia are still orthodox tea producers.
Kelegama said Sri Lanka should move towards CTC manufacture – which is happening to some extent now – to garner the Pakistan market but switching to unorthodox tea production takes time.
He noted, however, that there was another problem to counter in the Pakistan market – Unilever's influence.
Unilever – linked to Brooke Bonds and Liptons – controls over 75 percent of the Pakistan market and also has a sizable stake in Kenya. The company has been able to change the tea preferences in Pakistan to suit the type produced in Kenya.
He said Kenya-Pakistan trade is a two-way process with the former selling tea in return for rice from the latter, which could change with developments in COMESA. Kelegama said there are ways of exploiting the proposed Sri Lanka-Pakistan FTA through India's indirect involvement.
India and Pakistan are sworn enemies and there is little trade between the two, he said adding that Sri Lanka was in a strong position to attract investments from the two countries to sell to each other.
John Cooney, Resident Representative of the Asian Development Bank, says that Sri Lanka could achieve 8 percent growth or more if government support for macro and micro enterprises is forthcoming, ten years from now - by 2020.
He said to achieve these targets the government should adopt grassroots-level economic policies in line with modern thinking which would then increase the productivity of local entrepreneurs.
The private sector being the engine of growth must also play its role in reaching these goals, Cooney said at the Sri Lanka Entrepreneur of the Year awards ceremony organised by the Federation of Chambers of Commerce and Industries of Sri Lanka (FCCISL) in Colombo last week.
He said Sri Lanka should have an efficient and uncomplicated tax system to suit the country and create an entrepreneur culture because entrepreneurs would be the driving force of the economy in the future. Sri Lanka has all the potential to become one of the developed nations in the region if bureaucratic red tape and bottlenecks are removed particularly in the labour market. (HS)
Low grown tea production bounced back in October to reverse the declining trend in Sri Lanka's national output seen over the previous four months, commodity broker John Keells said.
The latter half of October in particular saw a revival in the production levels following the long awaited rains. Dry weather conditions, usually experienced during August, span-ned much longer this year, bringing difficulties to both agriculture and commerce, it said in a report.
Low grown production rose by 2.61 million kg (20 %) during the month, while medium grown output improved by a little over 0.47 million kg (12 %). High grown production, however, dipped slightly below last year by 0.03 million kg (0.6 %).
National tea production in October stood at 24.84 million kg, up by 3.1 million kg (14.4%) from the corresponding figures of last year.
"The favourable position seen in October 2001 narrows the hitherto widening gap of Sri Lanka's cumulative production from January. Up to end September, we were short by 11.7 million kg from the year 2000, but now, the deficit stands at 8.6 million kg, which is only 3.44 % below last year," the Keells report said.
It said by the end of October, Sri Lankan tea production totalled 241.17 million kg, against 249.78 million kg last year.
Cumulatively, the high grown crop is 8.83 million kg (12.72%) below last year, medium grown is down 2.96 million kg (6.41%) while low grown production recorded an increase by 3.19 million kg (2.38%). It is most unlikely that Sri Lanka would see another record harvest this calendar year, John Keells said.
John Keells Holding Ltd (JKH), Sri Lanka's biggest conglomerate, last week reported a sharp 58 percent fall in post-tax profits to 148.9 million for the six months to September 30, 2001 due to poor economic conditions.
The company said the macro-economic outlook for the current financial year remained "unpromising", with the domestic economy continuing to suffer from the unsettled political situation and the US economy in danger of sinking into recession.
But it said in a statement that the group had the diversity and the resilience to weather the present situation. "We believe that with better business conditions, shareholders can expect a substantially improved performance in the next financial year, especially once the effects of our current strategies and restructuring become more visible," Vivendra Lintotawela, chairman of JKH told shareholders.
Revenues at the group - involved in a range of activities including owning and operating a string of hotels here and in the Maldives, plantations, IT, supermarkets, food and beverages, commodity and stockbroking, banking and transportation - gained by 4 percent to 5.8 billion rupees for the six-month period. Pre-tax profits fell 47 percent to 280 million rupees.
Analysts said the performance was not too bad considering the economic crisis. "We had estimated post-tax profits for the second quarter (July-September 2001) to fall by 60-65 percent but the reported figure of a fall of 49 percent is slightly above our expectations," said Dushanth Wijesinghe, research director at Asia Stockbrokers Ltd.
He said JKH's full-year profits (2000-01) are projected to fall by 31 percent to 537 million rupees.
The highly diversified group has been hit by an economy that is expected to record growth of below 1 percent this year. The Ceylon Chamber of Commerce says growth this year is estimated at 0.8 percent, drastically down from 6 percent in 2000. The Central Bank says growth would be around 1 percent.
JKH said the business environment was affected by a prolonged drought that affected agriculture, extended power cuts, an unexpected downturn in tourism and a sharp slowdown in key export markets. The economy was also badly dented by LTTE attacks on the country's only international airport while the September 11 bombing strikes in the US, Sri Lanka's biggest garments buyer, jeopardised orders and led to cancellations.
Parliamentary elections are due on December 5 with the business community pinning their hopes on a victory by the United National Party, ousted from power in 1994 but seen by the private sector as a better economic manager than the ruling People's Alliance.
Lintotawela said the leisure sector was adversely affected by the twin strikes in Colombo and New York with profits from hotels in the Maldives being insufficient to compensate for losses in the company's hotels operations in Sri Lanka.
"While the parliamentary elections are likely to dampen the prospects for a short-term recovery in this sector, we plan to expand our operations into South India and the Maldives before the end of the year to reduce our reliance on the volatile domestic market," the JKH CEO said.
Lintotawela told The Sunday Times Business that there has been slight economic improvement in recent weeks with the end of a drought, lifting of power cuts and improved performance in the transport sector. "We are looking at investment in food and beverages and tourism in South India," he said adding that they hope to get a few projects off the ground by December this year.
According to Central Bank officials the World Bank has advised that the Central Bank is over staffed and a voluntary retirement scheme has been announced.
The employees have been requested to apply before the 15th of November if they want to be included in this scheme. Meanwhile, last Sunday's newspapers carried advertisements inviting applications for vacancies in the staff class at the bank. Why this injustice? Why should there be new recruitments if those already in employment are being laid off?
There is also a fear that the grant received by the World Bank for retrenchment of the staff has been misused by officials. I hope and pray that the next government will look into this and do justice to long-standing employees who have been deprived of their due promotions.
- Aggrieved party