Revival of Export Development Council – a far-reaching stride for the acceleration of Sri Lankan exports

by J. A. A. S. Ranasisnghe

Productivity Specialist and Management Consultant

It is heartening to note that President Gotabaya Rajapaksa has re-galvanized the Export Development Council (EDC) of the Export Development Board (EDB), consisting of nine ministries, after a lapse of 28 years, on the initiative of the Minister in charge Bandula Gunawardana with a view to formulating and implementing national export development policies and programmes. Assuming that the duration of Parliament life is five years, it could be safely assumed that the successive six governments have pathetically failed to promote and develop the Sri Lankans exports as per the mandate given to them in terms of the EDB Act No 40 of 1979 in a competitive global trade environment. The revival of the EDC is a formidable far-reaching intervention by the present government, as the need of the hour is to generate foreign exchange by exporting Sri Lankan commodities. No doubt that His Excellency’s inaugurate address would have sent a chilling impetus on the members of the EDC and other stakeholders, as there had been no forceful policy and administrative interventions from the head of the country for almost three decades.

The role of the EDB

The EDB is a brainchild of the late Lalith Athulathmudali who foresaw the necessity of a national policy-making body, at the highest level of governance, to facilitate the development of export oriented economy with the advent of the free-market economy in 1976 and it was possible for his to bring an legislative enactment No 40 of 1979 giving birth to the EDB. By virtue of the provisions of the Act, the President of the country is the chairman of the EDC ably assisted by the Ministers in charge of Trade, Shipping, Industries, Agriculture, Plantation Industries, Textile Industries, Fisheries, Finance, Foreign Affairs, Planning and Rural Industries. In its formative years, the EDB played a catalytic role in promoting exports and the award of the annual presidential awards have had an appreciable impact on the export-oriented institutions. It is a moot point why this vital institution (EDC) was forced to a backseat over the last 28 years and the Ministers in charge of Trade should be totally held responsible for their lackadaisical attitude for not invigorating this vital mechanism. Of the Ministers in charge of Trade, Minister Rishard Badudeen had steered the Ministry of Trade for a considerable period, out of the 28 years, but he appeared to have lacked the foresight to set in motion the EDC and as a result the country lost a cohesive and coordinated approach in generating millions of foreign exchange to the national coffers. With the abandonment of the annual presidential award scheme, the exporters have lost enthusiasm and drive and it would be more correct to say that the EDB has been a rudderless ship drifting without a captiain over the last 28 years.

Quality Standards for Imported

raw materials

It would be pertinent to revisit some of the critical issues touched upon by the President at the first meeting of the EDC last Wednesday. The President has emphasised that the import of raw materials required for value added products should meet the highest quality standards under strict supervision. It is quite true that a substantial quantity raw material imported to the country annually do not meet the required quality standard. Take for instance the low quality of pepper imported during the yahapalanaya regime under the guise of re-export after value additions, when the country is saddled with a glut situation of pepper and lack of remunerative prices for pepper cultivators.

Pepper Industry

With the surge of world production of pepper since 2017, inevitably there has been a deleterious impact on Sri Lankan pepper and the resultant scenario was that pepper prices in Sri Lanka crashed to $ 2,800 from $ 3,800 per tonne. Right from the second half of 2016, pepper prices have seen a falling trend. It was worse in 2017, 2018 and 2019. In this context, what was the rationale to import low quality of pepper from Vietnam and dump them in the local market thus depriving the local pepper farmers. Had there been an EDC in operation, this high-handed scenario would have never taken place. It is quite clear that the non-existence of EDC had given unbridled powers to the Minister in charge to manipulate the pepper market at the cost o

f the interest to the country and the local pepper growers.

It is well known that the demand for local pepper plummeted drastically when the market was flooded with inferior imported pepper and the pepper growers insisted grievance to discontinue the imports of pepper did not fell in deaf ears of the minister! Alas, In the year 2018 alone, 3,519,083 Kg had been imported to Sri Lanka from Vietnam, Indonesia, Brazil etc. One could just imagine the pathetic situation faced by the local pepper industry in this vicious cycle in the absence of a national body, such as the EDC.

Rubber Industry

Not only the quality but also the quantity of raw materials matters. It is alleged that rubber latex is imported to Sri Lanka by leading rubber manufacturing companies in excess of her actual requirement as there is a shortage of rubber latex in the country for value addition purposes and export. The statistical information book released by the Ministry of Plantation 2017 says that Sri Lanka imported quantity of RSS sheet rubber 43,727 Mt to overcome the scarcity of natural rubber to meet demand of rubber product manufacturers. Compared to RDD export of 2,940 Mt, the import quantity is much greater Thus, in 2017 total import of NR was 61,801 Mt with the corresponding CIF value of Rs. 15.888 million.

As in the case of pepper, the prices of rubber in major rubber growing countries such as Indonesia, Malaysia, Thailand, Vietnam, China and India have hit low bottom prices due to lack of remunerative prices in the world market and this has compelled our local manufacturers to import rubber latex from countries rather than buying rubber from the rubber smallholders. It is alleged that a well-planned ruse is in operation to release part of the NR consignment to the local market through the backdoor, depriving the livelihood income of the small holders of the country. Hence, it is utmost duty of the EDC to take an urgent decision not to give a blanket approval for the import of natural rubber, thus killing the local rubber industry. If at all, the import of natural rubber is required, it has to be vetted by an expert committee representing the Ministry, EDB, Customs, Ceylon Rubber Traders Association, Ceylon Chamber of Commerce, Ministry of Industries. In deciding the quantum of natural rubber to be imported, a mechanism to be designed not to exceed the quantity surpassing the industrial rubber produced and exported. This is the only way to nip this racket in the bud. The members to be appointed to the committee should be above suspicion similar to that of Caesar’s wife, as the unscrupulous players resorted to this high-handed racket are capable of influencing any untrustworthy member of this committee. Trust this proposal will receive the urgent attention of the EDC at the next monthly meeting.

Rubber Industry is in the verge

of extinction

The foreign exchange generated by the traditional three crops, namely tea, rubber and coconut used to play a dominant role in the Sri Lankan economy but the dominance of the rubber sector witnessed an alarming trend during the last 25 years as evidenced below.

It would be crystal clear from Table 1 that the annual rubber production has been on a decline for the last eight years and this downward trend is 10% per annum. (Insiders say that the annual production given in the year 2017 is cockeyed, given the unprecedented downfall in the production over the years and the Director General at the time of retirement, prior to taking up a foreign assignment camouflaged the of figures to his advantage). It would thus be seen that the local rubber industry is in the verge of extinction at the present adverse trend of 10% and it will completely routed out from the Sri Lankan soil by the year 2026, if drastic action is not taken to extricate the industry from the bottomless precipice.

The rubber sector is characterized by a series of professional maladies by low productivity, low profitability and low efficiency of operations, alienation of the smallholders from the cultivation due to lack of remunerative prices, dearth of tappers, non-supply of agricultural inputs on time, non-releasing of subsidy payment for new planting and replanting on time, gradual demise of the farmer societies and Group Processing centers, and the high priority being given to subsidy aspects over extension facilities, appointment of non-agriculturist to manage the institution ( Rubber Development Department) for the last 25 years with the amalgamation of the Advisory Services Department of the Rubber Research Board with the Rubber Control Department.

This deterioration trend of the collapse of the rubber industry commenced almost 25 years ago with the termination of the extension services to the rubber smallholders. The absorption of the services of the extension officers hitherto functioned under the Rubber Research Board to a newly created Rubber Development Department was the bane of the downfall. The shortsighted government bureaucrats and the Treasury conveniently were of the view that the rubber smallholders could be easily motivated by way of subsidy payments at the cost of extension services backed by research. The end result which we witness today is the result what we witness in Table 1.

New Institutional Arrangement

It will be well-nigh impossible to save the rubber industry unless a radical institutional shake up is made with priority being given to research and extension. It is my considered opinion that the EDC chaired by His Excellency would take a policy decision to create a new institution for the rubber sector.