By Paneetha Ameresekere
Competitiveness is about markets and increasing market share. It is a contest between a Sri Lankan industry versus an industry in another country, said Post Graduate Institute of Management’s (PGIM’s) Head of Research Dr. A. T. Fonseka at a presentation titled ‘The global economy: Challenges for Sri Lanka,’ that he made at the annual sessions of the Sri Lanka Economic Association (SLEA) recently.

He said that the meaning of globalisation was the closer economic integration of markets. "Sri Lanka is a part of that economy," said Fonseka. "Almost 25 years have lapsed since we moved into the open economy, while GDP and GNP growth rates are there, we however lag behind East Asian countries with whom we were on par in 1960," he said.

Fonseka said that Sri Lanka’s GNP per capita income in 1960 was US$ 152. While that of South Korea and Taiwan were US$ 153 and US$ 151 respectively. While Sri Lanka’s per capita income had increased to US$ 810 by 1998, in South Korea it was US$ 7,970 and Taiwan, US$ 9,600.

Meanwhile, the per capita incomes of Hong Kong and Singapore had increased to US$ 23,670 and US$ 30,068 respectively by 1998. He also said that Sri Lanka was by and large an infant economy. The process of industrialisation goes through four phases, said Fonseka.

Assembly, light engineering, heavy engineering and high tech. ‘We are not into light engineering, we are still languishing in stage one,’ he said. There is hardly any value addition for our principal exports which are garments and tea and we are regarded as a cheap tourist destination," Fonseka said.

Investments don’t take place to improve competitiveness and there is no strategy adopted by Sri Lankan companies. He said that the ‘channel of distribution’ comprises the producer, the channel per se which includes the importer, the wholesaler as well as the retailer, and finally the ‘end user’ himself.

"But all our marketing stops at the port," said Fonseka. The percentage of bulk tea exports has been increasing. 56% of the exports in 1999 were in bulk form, which is sending tea in the most primary form to international packers for value addition and branding.

"You have to brand your product," he added. Akbar Brothers, which engage in packeted tea under a Jordanian brand won an export award. Tea exporting companies project a 10% year on year increase in rupee earnings for teas. But this naturally takes place because of an average annual depreciation of the rupee by between 6% to 8%, he said.

"Go for long term planning. It is this environmental uncertainty that necessitates futuristic planning," said Fonseka. Fonseka further said that investments made by Sri Lankan firms on research and development (R&D) were negligible. He said that the country as a whole invests 0.2% of GDP on R&D. "But India invests 1%, and in the case of developed countries it is almost 3%," he said.

He also said that two US and two Japanese companies had applied to patent the medicinal properties of ‘Kothalahibutu,’ a plant native to Sri Lanka, while the medicinal properties of another native plant ’Pila,’ which is used to fight tooth decay, have been patented by Nissan Motor Company of Japan.

Meanwhile, India fought and won against several foreign companies which attempted to patent the medicinal properties of Margosa, where there are 90 patent applications, as well as Tumeric.

Fonseka also said that Sri Lanka is called a truck driver’s paradise for tourism. He said that without doing proper research, the Presidential Task Force on Tourism estimated that this year there would be a 20% increase in tourist arrivals over the all time record figure of 436,400 established in 1999.

Tourist arrivals for the first quarter of this year were 135,000, says a Central Bank report. Another example of making predictions without doing proper research was the estimation that the Garments Industry would earn US$ six billion in 2004, nearly three times more that the US$ 2.2 billion earned in 1998, said Fonseka.