Exporters to EU must be educated on Brexit – GM ECCSL Srinath

By Rathindra Kuruwita and Umesh Moramudali

Europe has been one of our biggest export markets for decades, and it still is, even after the loss of the GSP + concession in 2010. Ceylon Today spoke to Srinath Fernando, General Manager of European Chamber of Commerce of Sri Lanka (ECCSL) to discuss the current situation of the EU market, the issues faced by our exporters and what the government should do to take advantage of the probable resumption of the GSP + concession.

?: First of all tell us what the ECCSL does?

A: ECCSL was established in 1996 and its mandate is to promote trade between the European Union and Sri Lanka. There are 28 EU countries and only five have embassies in Colombo. The majority of the others have diplomatic missions in New Delhi. The missions based in Delhi make inquiries through our chamber to assist them in identifying business opportunities. We also work closely with the embassies in Colombo.

?: A significant number of our exports go to Europe. It is 20 years since the ECCSL commenced operations, how have things developed?

A: There has been a steady increase in exports to EU countries. There was a setback after the GSP + was withdrawn but I am confident we can recover this position once the concession is restored. I have seen the government is taking a lot of effort to ensure that we receive the GSP + and it seems that the 27 conventions that we had to comply with to get GSP + are being complied with, however, there is still some more to be achieved. Once we get the GSP + concession we will be able to increase our exports to the EU. But there is a task for the Sri Lankan Government that is to provide assistance to exporters to reach the respective markets. So, without reaching markets we can’t increase the volume of exports. There should be a holistic approach to our trade policy with foreign countries and we should recapture our markets which have been taken over by Bangladesh and Vietnam. Overall I think there is plenty of scope to develop trade between the EU and Sri Lanka.

?: You spoke of trade policy and now there is a draft trade policy document which is being circulated among various stakeholders. Have you seen this document and what are your views?

A: The chamber has not been privy to this document and we were not consulted. But we are aware of the existence of that document and we know that the government has taken various steps to improve the trade policy. My personal opinion is that positive steps have been taken and that things are likely to improve in the future.

?: You spoke of the need for a holistic trade policy. Can you elaborate a bit more on that?

A: For example we have a number of commercial councillors based overseas. It is the responsibility of these councillors to provide assistance to the exporters to capture the market and to tell them about market trends that exporters can capitalize on. I think there should be some reporting system so that local exporters can benefit from those reports. The local exporters don’t have the time to go and research the market; it is the responsibility of the councillors who are based in those foreign countries to keep the local export community informed. These councillors have a very big role to play in supporting our exports.

The government must also ease the restrictions that are hurting the industry, for example easy access to ports, easy to follow custom procedures and tax incentives, these must be offered to local exporters. These are needed to compete in the overseas markets. Bangladesh and Vietnam have cheap labour which makes them competitive; to compete with them we need some sort of a concession.

For example there are issues with multi modal containers that come to Sri Lanka. For example, Sri Lankan apparel exporters, they import a lot of raw materials from abroad. When something comes in a multi modal container, there are other trans-shipment cargo, that needs to go to other locations. If one parcel is considered suspect the entire container is held back. That has a major impact on the exporter because once the raw materials are delayed production is delayed.

We also conduct an EU- Sri Lanka investor dialogue which is mooted by Ministry of Export Strategies and International Trade.

This is held quarterly and at this forum issues can be raised and we have discussed these issues. These are very minor issues actually and can be easily addressed.

?: One of the main issues faced by exporters is the inability to access markets covered by the Madrid Protocol on Intellectual Property. How important is it for exporters to have the government adhere to that?

A: This mainly affects the non apparel sector. There are a number of IT related companies who have had this problem. They have lodged many complaints with us, even saying that some government institutions also use pirated software. Recently we had a complaint from a member of a chamber saying that some government institutions were using pirated versions of their software.

I can’t understand why the government would allow this to happen because they are duty bound to protect international law.

?: What are the sectors that would benefit from the recommencement of the GSP + concessions?

A: Currently apparel is expected to benefit the most, but I think we need to expand into other sectors because apparel is not a very viable option. There are many more areas with greater potential like electronics. We have to look at how we can use GSP + in a broader way instead of just focusing on textiles and we can also renegotiate our agreements with overseas countries as well. We can also improve our fishing exports.

?: Is it only cheap labour that makes it difficult for us to compete with Vietnam and Bangladesh?

A: Not really, in the case of Vietnam, the government spends about 6 per cent of their budget on education and the universities are encouraged to partner with the private sector. So in the case of Vietnam, their investments and orientation towards education makes the country attractive to foreign investors. As the government invests heavily on education most of the universities have very modern laboratories and private companies work with universities to improve their products. In Sri Lanka we are lagging behind in higher education. We need to reform the Universities Act to allow the private sector to take part in research in conjunction with universities. Research and Development is extremely important to compete in overseas markets, because innovation drives the market. We need to create new products that we can export. That is how Samsung captured the mobile phone market, due to their innovations. So Sri Lanka must also look at innovation through Research and Development.

?: We also export agricultural products to the EU. What are the non-tariff barriers regarding agricultural products like quality and standards certifications?

A: EU is a heavily regulated market and there are certain companies in Sri Lanka that have not been able to access the EU market because they don’t have the knowhow. As the EU is a heavily regulated market the exporters must know what laws and regulations govern the sector they wish to enter. Our chamber can assist those who need such information and we are ready to guide them, however, so far we have had very little response from the public.

?: Do you do any outreach programmes to inform exporters that the chamber is ready to assist them and about the services you provide?

A: No, so far we have not done that, but we are ready to assist any Sri Lankan exporter who wants to access the EU market.

?: Apart from fisheries and tea what other food items can we export to the EU?

A: As I said there are a lot of regulations regarding food imports to Europe but that does not mean that there is no export potential. We need people in these countries that can study the market, identify the opportunities and brief our exporters before the moment passes. This is where our trade councillors in foreign embassies have a role and they must play a bigger part than what happens at present.

This is not done properly and we have not invested enough on people. For example there is only one trade councillor in Germany. This person has to know the entire German market; we must increase staff in our embassies, especially in the commercial sector. As we are getting the GSP + concession it is time that we do it immediately.

?: Do you think that Brexit will have an impact on our exports to Europe because Britain was one of our biggest markets in the EU?

A: I think it will take some time for Britain to finalize its exit from the EU. And it is time that we research how Brexit would affect us when the process is completed, so far we have not done that. I think the Ministry of Finance and Foreign Affairs must undertake an immediate study on the impact of Brexit on the Sri Lankan economy. We have not done anything to educate our exporters. If we act now I think we will have time to adjust and face this reality.

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