There is an increase in exports and if the same trend continues exports will reach US$ 11.1 billion by the end of this year, said President National Chamber of Exporters, Ramal Jasinghe speaking at their 25th awards ceremony at Colombo Hilton.
In a marathon speech of over half an hour which put a section of the audience to sleep, he said that assuming a growth rate of 10% over the next 3 years exports could reach US$ 15 billion by 2020 as opposed to the national target of US$ 20 billion by 2020, for which the achievement requires an annual growth rate of 20%.
However, exports as a percentage of GDP currently stands at 12.7 % having progressively declined from over 30% since the 2000.
“Overall, our exports have been stagnant or have recorded an erratic and declining trend since 2010, reaching US$ 10.3 billion in 2016.”
Nevertheless, the latest figures shows a welcome positive turnaround achieving USD 6,521.9 million (6.5 billion) compared to US$ 6,013.1 million (6 billion) for the comparative period in 2016, reflecting a growth rate of 8.4%.
Fisheries products too have achieved a growth rate of 38.6% and agricultural products including plantation crops have achieved a growth rate of 17.2% during the first 7 months of the year, however our main export sector of textiles and garments has continued to record a negative trend with a decline of 3% in spite of regaining of the GSP+ facility.
It is also pertinent to note that according to the Central Bank Annual Report for 2016, Industrial Production as a percentage of our GDP is just 26.8% and of that figure, only 35.2% of this total production is exported while the major portion of the industrial output is consumed domestically.
“We are disappointed do note that the withdrawal under the new Inland Revenue Act the 300% deduction of expenditure incurred by any entity registered with the Tertiary and Vocational Education Commission (TVEC) for standard skills development training recognized by the TVEC, is counter- productive.”
Jasinghe also highlighted the delay encountered (over three years) to register Trade Marks and also Intellectual Property Rights (IPRs) locally and overseas.
Nevertheless the initiative to set up a ‘Single Window’ under the Trade Facilitation Program as well as the Revenue Administration and Information System (RAMIS) of the Customs for online transactions needs to be appreciated.
We feel that given the required ‘Political Will’, the best opportunity lies with the current Unity Government to put in place through consensus, firm National Policies to overcome these issues.
However it must be pointed out, that under the new Inland Revenue Act the tax incentive allowing 300% tax deduction of expenditure incurred for Brand Promotion has been withdrawn completely, which we feel is regressive and counter- productive, as this is a vital need for the export promotion of the country.
NCE President said the new taxation policy related to exports is not aligned to the National Export Strategy as demonstrated by the overall increase of Corporate Tax covering all export ventures from 12% to 14%, and more importantly applicability of the Corporate Tax of 14% to the hitherto exempt sectors related to Services Exports as well as to the Gems & Jewellery.
“We feel that the very limited incentive for providers of professional services only by individuals and partnerships with an exemption of Corporate Taxes up to Rs. 15 million of turnover, provided the exported professional service is consumed outside the country and not in Sri Lanka, is not rational. Further the tax incentive of 300% of expenditure incurred on R&D activities through State Institutions has been reduced to 200% under the new tax reforms. In the background where the expenditure incurred on R&D is less than1% of GDP in the case of Sri Lanka, and the necessity for innovation and differentiation of products and services to diversify exports of our country for which it is essential to incur expenditure on R&D, this approach does not provide a conducive environment.”
We hope that these concerns will receive the attention of the State authorities to make the necessary adjustments through the budget to be presented in November. Under the new Inland Revenue Act for the requirement for an enterprise to export at least 80% of the production to be eligible for the “concessionary corporate taxation” of 14%, applicable to export ventures, and that too only for the exported component.”