* Urges removal of export cess of Rs. 15 per kilogram and granting relief to exporters
* Says continual price declines a major concern
* Adverse weather conditions in 2014 halt total production at 98,570 tonnes
By Charumini de Silva
The Colombo Rubber Traders Association (CRTA) called on the Government to re-evaluate industry policies in the wake of reduced production and weak international demand.
CRTA Chairman M.S. Rahim said the export cess of Rs. 15 per kilogram levied by the Government had largely contributed to making export prices to niche world markets unattractive, leading to a decline in exports of thick pale crepe, scrap crepe, sole crepe and TSR.
Pointing out that Sri Lanka was the only producer of these grades, Rahim urged the Government to remove the cess and grant relief to exporters when world markets were facing difficulties due to slow demand.
Rahim made these remarks while addressing the 96th Annual General Meeting of CRTA in Colombo recently.
He went on to say that as recognised premium grades of rubber, these were not consumed by local rubber product manufactures as input in their products. He added that the imposition of export cess on these grades had not reached its objective of encouraging increased consumption in value-added products for export.
In view of the drastic decline in prices, a guaranteed price of Rs. 300 per kilogram for all grades of RSS was offered to rubber smallholders from 15 November 2014 to January 2015 via a scheme implemented by Rubber Development Department (RDD).
However, with the Government change in January 2015 they decided to pay a guaranteed price and introduced a scheme to support the smallholders that produce bulk of RSS rubber. It was granted Rs. 350 for RSS1, Rs. 325 for RSS 2/3 and Rs. 300 for RSS 4/5.
Rahim explained that the new guaranteed price greatly benefited smallholders.
“As smallholders produce the majority of RSS 3, 4 and 5 they can receive the subsidy based on the difference in price achieved at local auctions held at the Ceylon Chamber of Commerce (CCC). Thereby, they achieve a maximum price of Rs. 300, which will be most profitable and well above world market prices,” he added.
Pointing out that this new scheme had created inequality in the industry he said: “Unfortunately, plantation companies and large estate owners were exempted from this subsidy; despite the fact that they produced good quality RSS 1, 2 and 3.”
Due to the adverse weather conditions that prevailed during 2014, there was a drastic drop in production. The year ended with a total production of 98,570 tonnes.
Commenting on the price declines, he said: “At the beginning of January 2014 latex crepe no.1X obtained Rs. 410, while RSS1 fetched Rs. 345 per kilogram. However, by the end of January prices dropped sharply to Rs. 310 for latex crepe no.1X and Rs. 278 for RSS 1. Thereafter, prices continued to drop further to Rs. 295 for latex crepe no.1X while RSS 1 dropped to its lowest Rs. 250 at the end of 2014.”
Reuters: Sri Lanka’s local borrowing through Government bonds has surged, surpassing the total figure for all of last year, data showed on Friday, as the new Government struggles to pass crucial tax bills announced in January to finance some populist measures.
The Government has borrowed Rs. 378.3 billion ($2.28 billion) through Treasury bills and bonds so far this year until Wednesday, higher than the Rs. 259.8 billion it borrowed in 2014, the latest central bank data showed.President Maithripala Sirisena’s Government, after coming to power following an 8 January presidential election, revised down this year’s budget deficit to 4.4% of Gross Domestic Product in 2015 from an original 4.6% by reducing spending on infrastructure projects.
However, the Government in the budget also announced a raft of populist policy measures as promised in the election campaign at an additional cost of Rs. 95.5 billion.
It also announced plans to impose new taxes worth Rs. 80.3 billion to finance the concessions promised in the run up to the election including salary hikes to state-sector employees and pensioners.
However, the Government is unable to pass some key one-off retrospective taxes as it lacks a majority in Parliament.
“The lack of additional tax revenue as planned has resulted in more borrowing from the local market,” Danushka Samarasinghe, Head of Research at Softlogic Stockbrokers, said.
Finance Minister Ravi Karunanayake last week told reporters that the minority Government “is being held hostage by a majority Opposition”.
The new Government is expected to face a Parliamentary election soon. Finance Ministry officials have said some of the populist measures have already been implemented even without the additional revenue, mainly from existing taxes and debt.
The Central Bank in a surprise move cut the key monetary policy rates by 50 basis points in April, a move economists expect will reduce the new Government’s interest cost.
The Parliament rejected Karunanayake’s proposal on 7 April to increase the Government borrowing limit by Rs. 400 billion to bridge the revenue shortfall.
By Charumini de Silva
Concurring with growth projections made by international monetary organisations, Central Bank Governor Arjuna Mahendran is confident Sri Lanka’s economy will average around 7% during the first half of 2015, with growth picking up in subsequent years.
“By the end of six months this year, we will average around 7%. There’s nothing to worry,” a confident Governor told the Daily FT.
“I think things are looking good. Once we hit $ 4,000 per capita, the economy will shoot up. I am hopeful that we reach that level by the end of this year, in which case we can look at 8% to 9% economic growth in the next five years,” he added.
Sri Lanka’s economic growth is expected to decline to 6.9% in 2015 due to slowing construction activity, according to the World Bank, which has also warned private sector sentiment would be cautious till economic policies of the new Government stabilise. The International Monetary Fund (IMF) earlier in the year gave a growth outlook of 6-7%, and the Asian Development Bank (ADB) a growth of 7%. The country grew by 7.4% in 2014. Further explaining economic factors, Mahendran said that the agriculture sector was recovering after the drought last year, which was a good indication. However, he noted the construction sector had slowed down, mainly because the new Government was reviewing some of the infrastructure projects.
However, he pointed out that agriculture picking up and construction slowing down would balance out the difference.
“That way I think it will keep the economy evenly balanced,” he said.
Further clarifying his point, the Governor said private construction such as housing was booming.
“Exports are doing well. Now that the rupee is down by 2% against the dollar, that will also help competitiveness and exports will continue to grow. Exports and FDIs are the two areas we need to improve on. Those are the two areas we are focusing on. The Minister of industry and Commerce has his plans in the export sector. The BOI is developing its plans for FDIs. With those two I think in the medium term we could go beyond 7.5%.”
Commenting on remittances, Mahendran said that the country received a record $ 7 billion last year and would continue to grow. “Remittances are the critical component that really saved the economy for the last 10 years during and after the war,” he added.
“We are like the Philippines and the Mexicans, which are countries with huge expatriate populations and that is a different kind of an economic model from other countries where they stay back home and grow their own industries. We have to factor that in,” he noted.
“Being an expatriate myself, I’m very keen on giving more opportunity to grow their own economy. At the end of the day, we all love our country. We send the money earned to relatives, to invest or to build houses. So we must grow this channel,” he pointed out.
The Governor said he would continue to focus on the importance of banks establishing a system for expatriate workers to easily remit their funds.
Citing an example, he said: “In Philippines if a housemaid is working in Dubai she can directly and easily remit money every month on her mobile phone to a property developer who is building an apartment. The same way we could setup a payment system where I could remit some money via my mobile to my Sri Lankan account or to a Sri Lankan property developer.”
With such easy schemes, the Governor expressed confidence Sri Lanka could attract foreign exchange. He added that discussions were ongoing with banks to set up similar systems.
“We are talking to the banks. We are working on some options and I’ll announce it in a few months,” he assured.
Mahendran also noted the Central Bank was attempting to conduct more detailed studies on the makeup of remittances, including regional and gender divisions, which would help in meeting specific market needs.
“We know that 50% is from the Middle East and the rest from other parts of the world. But who are the type of people who are sending those remittances and what’s the proportion between housemaids and other professionals? For that sort of information, we actually have to send people out and do a survey or ask the local banks receiving remittances to give us some details. We are starting that study at the Economic Research Department,” he said.
Sri Lanka to host Global Rubber Conference in October
By Malik Gunatilleke
Sri Lanka is on its way to making the rubber industry a $ 3 billion sector, Minister of Industry and Commerce Rishad Bathiudeen stated following the announcement that the 4th Global Rubber Conference (GRC) and Exhibition will be held in Colombo from 27 to 30 October.
The GRC, formerly held as the Asean Rubber Conference until 2010, has been held in Cambodia (2011), Vietnam (2012) and Indonesia (2013) so far, while Sri Lanka will be hosting it for the first time with over 700 trade visitors and 28 countries set to participate.
The event, co-organised by the Sri Lanka Export Development Board and Confexhub, will be themed ‘Sowing the Seeds of Sustainable Future’. The Ministry of Plantation Industries and the Ministry of Industry and Commerce have extended their support for the event as well.
“We are now aiming at an ambitious $3B rubber industry in the coming decade. To arrive at this $3B in a viable manner, it is essential for us to support the rubber industry including growers. I believe it is time for a long term development plan for this sector,” said Minister Bathiudeen, speaking at the launch of GRC in Colombo on Thursday.
“There are several important socio-economic reasons to strengthen this industry. It is time for a long-term development plan for the rubber sector,” he stated.
In that context he said that hosting the GRC will be a great opportunity for Sri Lanka to take the sector to the next level, providing local stakeholders a chance to network with their international counterparts.
In 2013, Sri Lanka earned $ 72 million in rubber exports as well as $ 887 in rubber finished products. The total earnings of $ 960 million was a 100% increase in earnings from 2009, the Minister added.
Sri Lanka is currently the sixth largest exporter and the eighth largest natural rubber producing country in the world while the Government has set in place a 10-year plan to develop the sector.
Meanwhile, the Ministry of Industry and Commerce also announced the implementation of two projects including the first ever rubber industry database as well as a national rubber research consensus at a cost of more than $ 46,000.
Commenting on the current situation regarding the rubber sector in Sri Lanka, Export Development Board (EDB) Chairman and Chief Executive Bandula Egodage explained that the rubber industry was separated into the plantation services, pertaining to raw rubber production, and the rubber product manufacturing services.
He stated that the EDB has initiated several projects to improve the industry while it encouraged value addition as opposed to raw exports.
“We do not intend to curtail raw rubber production in Sri Lanka, but as part of our export vision, we are looking to add value to our exports. That is our mandate and direction,” he said.
Egodage highlighted the importance of networking, awareness, investment and global recognition which is where hosting the GRC in Sri Lanka would benefit local stakeholders.
The GRC will bring together stakeholders from the US, Europe, East Asia, North Asia and ASEAN countries to discuss issues concerning the global NR situation, strategies and challenges for sustainability, enhancing quality and several other issues.
The International Rubber Research and Development Board Secretary General Dr. Abdul Aziz urged all rubber players, policy makers, industry experts, producers and manufacturers to make use of this opportunity to discuss strategies aimed at expanding the rubber industry for global sustainable growth.
He explained that current global rubber prices are not conducive but predicted that they would recover. The GRC will help participants discuss the challenges that lie ahead as well as new material and strategies to improve value addition.
According to Dr. Aziz, over 50,000 products are made from rubber and around 70% of rubber production goes into the tyre industry.
He shared his optimism regarding the future of the global sector, revealing current initiatives that focus on working with different species of rubber trees.
“We are currently only working with one species (Hevea brasiliensis) but there are nine recorded species of trees. Projects are under way to head into the Amazon jungle in Peru to collect these other species,” he said.
Confexhub CEO and Director of the Organising Committee of the GRC, Paul Yeo briefed the gathering on the itinerary for the four-day event, underlining its key speakers and segments.
“The conference will feature speakers from 12 countries, 20 paper presentations by the cream of the rubber industry covering topics under six special-focused areas and a forum discussing venturing into new planting areas in non-NR producing countries,” he said.
The conference will also include a pre-conference study tour of the Sri Lanka Rubber Research Institute as well as a post-conference half-day tour to the only rubber auction in the world, which is administered and managed by the Colombo Rubber Trader Association.
Source : ft.lk