For the export and business sectors to take up the challenge, the future must be clearer than what it is. We must see a consistent and long term policy framework. We must see speedy action and a greater understanding of the problems in the business sectors, says A. S. M. Muzzamil — chairman, Exporters Association of Sri Lanka at a budget seminar held last week. The text of his speech is given below.

"This year’s budget was presented by the finance minister at a time when the country was going through a serious economic crisis. The budget therefore, did not try to provide any goodies to any section of the community. In fact, after a long time we have seen a sincere and pragmatic approach to the problems facing the country.

We also see the budget as the first detail statement of economic policy of the new government.

We would like today’s seminar to be one of ‘way forward’ rather than merely examining the budget proposals. We can see some of the economic direction of the government and we must now see how we can build on it. There is much the private sector and the export sector can do, provided the direction is clearly set by the government. We do hope that with time, the structural arrangements and the policy framework of the government will be streamlined to provide the necessary impetus for the growth of the economy.

One can see a pattern of thinking of the government which we trust will be consolidated and carried through in the years to come. The emphasis on the private sector to shoulder the wheels of the economy is clearly evident.

The issues facing exporters or for that matter all businessmen are many - most of which relate to business competitiveness and confidence in government policies.

In simple terms, competitiveness is tied up with costs. Costs in terms of time, capital, materials and skills need to be minimised. All of us are forced to waste a lot of time doing unproductive things. Money is often tied up in many places without being put to productive efforts. Transaction costs remain very high. Some of the skills in short supply are wasted in satisfying archaic regulations. We therefore need to identify areas to be addressed both in our own company environments as well as in the overall structures in the country to enhance our competitiveness.

It is heartening to note that some measures have been initiated towards deregulation and simplification. Information technology is also expected to be used towards facilitating these initiatives. These measures need to be intensified and results generated as soon as possible.

We are still to see a direction for the export sector. Many issues facing the sector remain unresolved. The issue of the terminal handling charge still remains. Labour legislation regarding overtime of workers in the apparel sector is still pending. The country is the loser as time is money.

Whilst the challenges facing the apparel export sector has to be met and surmounted, the dependency on this sector has to be consciously reduced by looking for new products and also by increasing the impact of the existing products on the economy. More innovative policies and strategies are necessary to achieve value addition and diversification of our country’s export product base.

We must also rethink the policies and structures in the export sector. For example, some time ago incentives were given for trading houses. But this was not successful as the development of trading houses was not possible as there was no encouragement for smaller companies to work with them. There was no scope for indirect exporters as all incentives and benefits were targeted to direct exporters only. It is necessary to rethink the policy regarding local industries, the agricultural sector indirect exporters and direct exporters. After all a strong local industry and an agricultural sector, providing for the local market and supporting exports can only strengthen the economy.

It is important to note that traditionally Sri Lankan businessmen have focused mainly on short-gestation projects. This is because of the inconsistencies in the policies of the government. Even today, despite the positive signals of the government, the change in mindset is yet to come.

For exporters, this issue is even more important. Exporters work in overseas markets in competition with products from China, India and a host of countries with low costs of production. Our cost of production has no relevance in these markets. Prices are fixed according to market forces and not so much on costs.

In the year 2000, the interest rates shot up by almost 50% within a few weeks as the government desperately ran short of funds. Similarly, we are just witnessing a dramatic escalation in energy costs. These unforeseeable cost escalations will affect companies in different ways depending on how sensitive they are to these costs. Companies going bankrupt as a consequence have no one to turn to.

For the export sector and also the business sector to take up the challenge, the future must therefore be clearer than what it is. We must see a consistent and long term policy framework. We must see speedy action and greater understanding of the problems in the business sectors."