The Industrial Technology Institute (ITI) of Sri Lanka will help 250 SMEs in key export sectors comply with environment standards stipulated by the European Union through a EUR 1.5 million grant from the EU SWITCH-Asia project.

SWITCH-Asia is an EU initiative to help Asian country’s switch from unsustainable patterns of development to more acceptable patterns, where environment and health issues are of paramount importance when driving industrial growth.

The project also aims at changing consumer patterns, showing the need for consumers to make conscientious decisions when choosing a product, giving emphasis to environmental and health issues rather than only price.

The institute, which is under the purview of the Ministry of Science and Technology, is also hopeful banks would step forward to assist SMEs adopting environment standards with low interest credit schemes, a must if the project is to be a success.

"We will engage local and foreign banks to assist these SMEs with low interest loans because there is huge cost involved when converting processes to environment standards required to export to the EU," Dr. A. M. Mubarak, Director/CEO, ITI, said.

Prof. Tissa Vitharana, Minister of Science and Technology, said everything will be done to ensure these low interest loans are made available.

ITI would partner with Megaskills of Britain, Fraunhofer Institute of Germany and IVL of Sweden and enhance its capabilities in the areas of solid waste management, energy management and energy recovery (through waste) and pollution "modeling".

Through these collaborations, ITI will also establish an Environmental Recognition Scheme to educate SMEs on the importance of adopting environmental friendly manufacturing processes. It hopes to build its capabilities in the areas of life cycle analysis, values chain analysis and hopes to establish a database called an Environmental Information System as well.

The Ceylon Chamber of Commerce will help ITI coordinate with the industrial sector.

The Central Environmental Authority and the Export Development Board are project associates.

Why switch?

European markets are becoming even more conscious about environmental and health issues and gaining access to these markets will depend on how best Asian countries can meet EU standards.

ITI has identified key export sectors which are heavy polluters, resource intensive and bring in significant foreign exchange. They are; Clay products (ceramics, tiles and porcelain), Rubber and Plastic Products, Leather and Footwear, Coconut Products (charcoal, desiccated coconuts and coir products, Services (heavy machinery, service stations and the construction industry).

ITI was able to negotiate with the EU to include the tourism industry into the project as well.

Waste recycling and disposal are big issues in Sri Lanka lacking proper systems and they have been included into the project as well.

"European markets will not compromise on environmental and health issues so if Sri Lankan exports are to find buyers they will have to comply with EU standards," Mubarak said.

Prof. Vitharana said Sri Lanka has little choice but to comply.

"There are tariff barriers in international trade and the WTO is trying to address them. There are also non-tariff barriers. Environmental standardization is one of these non-tariff barriers. Sri Lanka must learn to conform to the highest possible standards because manufacturing a good quality product is no longer going to be enough. We need to be price competitive, for this we will need to invest in technology," he said.

ITI will conduct a survey of 750 SMEs in these export sectors of which 250 would be shortlisted. The institute will provide all the necessary technical inputs required to make the switch from conventional manufacturing to environmental friendly methods. But it is a costly exercise the SMEs would have to bear themselves.

The ITI says it is doing all it can to get banks to grant loans at concessionary rates.

"The initial investment may seem very high but in the long term there could be many benefits, especially on the cost side where processes become more cost effective," Dr. Anura Ekanayake, Deputy Chairman of the Ceylon Chamber of Commerce said.

The ITI hopes to charge a fee amounting to about Rs. 30,000 to Rs. 50,000 for its services to SMEs.

Gerry Suraweera, Project Consultant of the Ceylon Chamber of Commerce, said Sri Lanka’s labour advantage was slowly wearing out, stressing the need to invest in newer technologies and adopt high environment standards.

This initiative is important because it will give the SME sector added reach to EU markets and provide the platform for a more environmental friendly approach to developing the country’s economy.