National Chamber calls for SME development through trade facilitation

Following is the speech delivered by the newly appointed National Chamber of Commerce of Sri Lanka (NCCSL) President Asela de Livera, at the 60th Annual General Meeting (AGM), held recently.

I would like to welcome our chief guest and past president, Speaker Karu Jayasuriya and our guest of honour Finance State Minister Eran Wickremaratne to our AGM. I warmly welcome all the high commissioners, ambassadors, members of the diplomatic community, government officials, international agencies, business community, members of the NCCSL, media and all distinguished invitees.

Welcome to the 60th AGM of the NCCSL. 

I am honoured to be elected as the 33rd President of this prestigious chamber. I assure all of you that I will take forward the good work done by my predecessors to take the chamber to greater heights. 

I am taking over the presidency at a critical period for the economy in both the local and international contexts. As a nation, we face many internal and external challenges, similar to many developing countries. We need much stronger measures to resolve the present crisis and pursue policies to stabilize the macroeconomic fundamentals following a consistent and consensual economic policy, which is vital to face these difficulties and achieve a steady growth.

Lankan economy and export development
The World Bank expected the Sri Lankan economy to grow at 3.9 percent in 2018 and 4 percent in the next two years. Due to the weather disruptions in the last couple of years, which negatively affected agriculture, Sri Lanka recorded a growth of 3.3 percent in 2017. This is one of the slowest growth rates in the recent past. In comparison to this, the growth in the South Asian region is projected to top 6.9 percent this year and to accelerate to 7.1 percent by next year.

South Asia is taking up its position as one of the world’s fastest growing regions despite the reality that most South Asian countries generate low tax revenue and run large budget deficits often made worse by economic shocks and election cycles.

The World Bank warns a more turbulent external environment, manifested by trade wars and capital outflows from emerging markets and calls for prudent economic policy and more fiscal discipline.

The export sector performance is also very critical for an economy to progress.

The present-day critical factors, such as local currency fluctuations, can be addressed through increased export revenues. 

Initial steps have been taken by the authorities to prepare the National Export Strategy (NES) for Sri Lanka as a joint effort of the public and private sector consultative process under the patronage of the prime minister. The main theme of the NES is ‘Sri Lanka – An export hub driven by innovation and investment’. The key focus sectors that have been identified are ICT, wellness tourism, spices, boat building, processed food and beverages. It is of utmost importance that it should be revived at regular intervals, enabling to bring in timely changes.  

In an environment that we have regained GSP Plus and having NES implemented, on behalf of the business community, we request the authorities to align local economic development activities towards an export strategy so the entire economy will be benefitted with a positive impact on employment generation and GDP, narrowing the current trade deficit, which is a serious burden on the external finances, despite an export growth of nearly 10 percent, which was nullified by an increase in imports, being at a far larger amount. 

I believe that there should be a moderation in imports. More stringent measures are needed with regard to unessential imports that are causing this deficit in spite of the growth in exports. Maybe at least till the situation improves.

The economic diplomacy activities carried out by the Sri Lankan missions abroad and the Foreign Ministry at large is commendable and as chambers, we are ready to support this process. 

SME development
As in many other economies, in Sri Lanka, the main driving force of the economy is considered to be small and medium-sized enterprises (SMEs). Approximately 75 percent of the enterprises in the country can be classified as SMEs and they provide approximately 40 percent of the employment in the country in diversified sectors, ensuring growth. 

It is noted that unfortunately, many SMEs do not use the latest technology and have limited access to finance due to the collaterals not being available. Further, SMEs are disconnected from their markets, especially in the case of exports. It’s noted that now many schemes are being worked out in making available the finances but more publicity should be given on these.

Studies confirm the positive impact of SMEs in enhancing productivity and increasing employment both nationally and globally. Trade and investment liberalization taking place in the Asian region through preferential trade agreements improve competitiveness and generate more jobs, leading to sustainable development of the region.

The National Chamber is very much involved in SME activities and carries out several programmes to assist the SMEs to develop their business skills and knowledge.

Fragmentation of production 
Cross border production based on the fragmentation theory is becoming popular in the SMEs spectrum. Due to the technological advances, various stages of manufacture could take place in different countries. As a result, semi-processed goods may cross national borders many a time for these transactions. It therefore is of utmost importance to have increased efficiency and to reduce cost of cross border services.

Implementing SME-enabling policies 
In order to ensure SMEs are well connected with global markets, the authorities have to introduce and maintain SME-friendly policies. These policies focus on encouraging innovation, increasing competitiveness, providing cheaper access to inputs, lessening red tape and reduction of tariff and nontariff barriers through preferential trade agreements, etc. 

Regional and bilateral trade agreements need to pave the way for SMEs to be meaningfully integrated with global value chains. Trade sections operating in our missions should find out information on how to and whom to contact to market our exports.

Chambers together, with government development agencies and financial institutions must have a common development strategy for micro, small and medium entrepreneurs.

We should continue to encourage entrepreneurship in this country.  

I am proud to note that the National Chamber of Commerce works hand in hand with provincial and district chambers to address this situation. We conducted the Western Province Entrepreneurship Awards in 2016, 2017 and 2018, on an invitation by the National Enterprise Development Authority under the Industry and Commerce Ministry. This has paved the way for MSMEs to come to national level and compete with larger business ventures, through our flagship event of the chamber – the National Business Excellence Awards scheme. 

I think this is where it’s necessary for the larger established companies in this country to give a hand to the SMEs. They should encourage the local SMEs by handing over sub contract work to our local entrepreneurs or by purchasing semi-finished items. These larger companies should not only purchase from SMEs but also provide them the knowhow on how to maintain quality in production methods. I am sure if given this chance, our own SMEs can remodel their production methods and quality to international standards.

Shortages of skilled labour and unemployment
As per our statistics, the shortages of skilled labour across all industries continue to be a hindrance in manufacturing and service industries in Sri Lanka. It is vital for Sri Lanka to have policies to increase skilled labour availability directed towards export-related industries.

There should be change in the attitude of young people joining industry for the first time to get into semi-skilled or hands on jobs. Social acceptance for these jobs is at a minimum level. The government, private sector and media at large have a great national responsibility to make this transformation to happen. 

I would like to talk a little bit about the portals created to benefit cross-border efficiency. Please do bear with me as this information will be useful in our vision.

National Single Window 
The National Single Window or the NSW for foreign trade was created using information technology and telecommunication platforms, in order to facilitate import, export and transit bureaucracies. It offers a single point for the submission of standardized information and documents to fulfil official demands and facilitate logistics. 

The single window attributes include a single point of payment, improved business process in government agencies and speedier turnaround for approvals and decisions. It gives an opportunity for traders and their agents to connect up with the Trade, Agriculture, Health, Food Security and Finance Ministries and so on to electronically lodge licence applications and customs declarations.

Trade Information Portal 
The web-based Trade Information Portal (TIP) is aimed to help generate trade and investment in the country by making all cross-border trade regulatory information available at a stroke of a button.

The information provided includes prohibitions, laws, restrictions, technical standards, commodity classification and tariffs, procedures for licences, permit application and clearances, information pertaining to government ministries, Customs, Port Authority and standard institutions in plain language instructions included in the TIP.

Investment promotion activities
There are four types of investors who would be reacting differently for investment policies and administration aspects of a country.  

• Natural resource-seeking FDIs. 
• Strategic asset-seeking FDIs, which would be bringing in technology, brands and a competitive edge.
• Market-seeking FDIs, which are interested in local or regional market access.
• Efficiency-seeking FDIs, which are more interested in cost saving, getting connected with international production networks and targeting for export production.To develop investment, the following conditions should be encouraged: 
• A favourable and steady exchange rate.
• A skilled labour force.
• Physical infrastructure such as availability of electrical power and good logistics.
• Strong macroeconomic conditions.
• Political stability.

These are considered some of the key decision-making factors for FDIs.  

Political stability is gaged through the following aspects:  lack of transparency, the predictability in dealing with public agencies, sudden negative change in the laws and regulations, delays in obtaining necessary government permits, approvals to start or operate a business, restrictions in the ability to transfer and convert currency and breach of contracts. 

It is challenging for the government to be competitive with other nearby countries. Every economy is offering lower tax, tax holidays and other investment incentives for preferred business sectors. 

Ease of doing business has become a key in decision-making criteria. 

Role of media in economic development
I believe the media, both print and electronic can play a tremendous role in the economic development of this country. There are various loan schemes, technical assistance programmes and trade development programmes in operation, run by the government and various establishments. Given the number of channels and newspapers today in operation, they can be very effective in communicating these programmes and letting society know details of these offerings, which will open up so many business opportunities.

There are very few business programmes such as how to start a small business, how to market a product locally, etc. being produced. There are many things a small entrepreneur can learn through the media channels.  So I would like to make a humble request to all media personnel to look at this request positively.  

Agriculture
Finally, I would like to speak a few words on agriculture as it plays a vital part in an agricultural-based economy as ours. Food and security in crops is very important to our economy. We need to value add to our agricultural products and find markets for newly 
developed products.

For many years weather had failed us. (This type of weather patterns had been experienced during our history. That is why we have an irrigation system in tanks and waterways that no other country in the world has). This should not be an issue even now if we encourage new methods to agriculture.

Dubai grows its own food crops and even exports them to other gulf countries. These are desert countries.

Green houses and tunnel agriculture can be adopted to save water and control the environment. Special lighting can be adopted even to stimulate the sun movements to help produce seeds.

Unfortunately, 50 to 60 percent of the production is lost due to unavailability of proper storage, cold rooms and proper transport facilities. Even now there will be a bumper rice harvest the next few months. Are we ready with storage facilities? These can help the farmers to sell directly to the trader without going through middlemen.

The National Chamber is considering organising an agricultural exhibition every year to promote agriculture, find domestic and foreign markets and educate the farmers in modern methods of agriculture.