Saving on imports

The world has become a small village thanks to developments in transport and communications. We do not think twice about buying or consuming butter from New Zealand, milk powder from Ireland, cheese from Australia, apples from the US or canned fish from Chile. The open economic system has opened our doors to a flood of imports ranging from cars to foods.

But do we pause for a moment to think about the massive foreign exchange bill incurred on these imports ? Sri Lanka spends more than Rs. 60 billion per year on food imports alone. Is this practice viable in the long term for a developing country such as Sri Lanka ?

The Government is giving serious thought to this question. Many foods can be cultivated, processed and marketed locally, ideally saving billion of rupees. Agricultural Development Minister Chamal Rajapaksa has gone on record saying that the policy of the Government is to reduce the food import bill over a period of three years to encourage local producers.

The same issue was highlighted during a Parliamentary debate last week, where Members on both sides agreed on the imposition of a cess tax on non-essential imports including certain raw and processed foods. The aim of this move is to discourage the imports of such items in high volumes and to dissuade the consumer from buying such high-priced items in the marketplace. The idea is that the consumer will instead opt for a cheaper local variety, if available.

Both these approaches work well on paper. But there are many practical considerations which have to be fulfilled in the real world for these measures to succeed. The open economic system is perhaps the biggest challenge. We can never again go back to a closed, centralised economy which has been rejected by the people. We have to allow the free entry of goods to the country under an open economy.

Besides, Sri Lanka has signed a number of Free Trade Agreements under which certain items are granted zero duty or low duty status. The SAARC region will become a free trade zone in less than 10 years. Reconciling FTA rules with tax systems aimed at boosting local production will be a major challenge.

At the consumer level, changing public attitudes regarding local products is vital. Given a choice, many consumers are loath to buy local products, especially processed foods like butter and cheese and at a higher level, consumer durables and vehicles.

They are obviously under the impression that local products are inferior in quality. This is not always the case. Changing this mindset will take time, but it is a 'must'.

The authorities must also pay attention to the storage, transport and marketing of agricultural and fisheries products. Nearly 50 per cent of fruits and vegetables go waste in the post-harvest period due to lack of storage and preservation options.

Methods must be devised to preserve in-season vegetables and fruits for use during the off-season. The popularisation of liquid milk will help ease the demand for milk powder and fish canning factories will help stem the tide of canned fish imports.

The time has perhaps come for a comprehensive policy aimed at boosting local products while Sri Lanka continues to an active partner in world trade.