Fourth Annual General Meeting of the Sri Lanka -
France Business Council:
‘Plans to mitigate impact on apparel sector’
Fourth Annual General Meeting of the Sri Lanka - France Business
Council was held recently at Colombo. Patron of the council Michel
Lummaux, Ambassador for France was the chief guest of the event.
The newly appointed president, Nirmali Samaratunge highlighted the
challenging role of the France Business Council in her speech. The
Council has, before it, the task of promoting bilateral trade
particularly with a focus on exports, as well as promoting Inward
Investment and Tourism. Whilst the French economy had shown a solid
performance and around 2% GDP growth in the previous year, in the light
of the current global economic turmoil which has now spread to Europe as
well as other key economies, the Council now has a challenging task
before it. - The Eurozone economy. Of which France is a member, has
fallen into its first recession.
What is feared is that this is only the beginning and the crisis can
expect to worsen. The G20 industrialised and emerging economy nations
gathered in Washington to discuss ways of alleviating a world economic
downturn, and prevent the repeat of a financial crisis which set this
off. French President Nicholas Sakorzy, currently heading the European
Union, featured prominently in this regard, strongly calling for
increased economic regulations and major reforms of the monetary system.
Renewed growth is not expected till the second half of 2009, which is
bleak news for Sri Lanka in terms of the outlook for business with
Europe including France, which has already started laying off several
hundred workers in its affected industries, she said.
As the global economy heads into a recession, with ensuing
contraction in consumer spending and decline in demand, Sri Lanka too
can expect to be adversely impacted with increasing pressure on foreign
exchange reserves and balance of payments, accompanied internally, by
rising cost of living and inflation, which, though reported to have
marginally declined, is still in double digits
Uncertainty regarding continuity of the EU GSP Plus Facility poses
further challenges to Sri Lanka. Almost 40% of exports go to the EU,
primarily apparel, a US$ 3.2 billion Industry, which accounts for
approx-imately 10% of the GDP, and employs over 270,000 people. France,
is in fact, a major market for this sector. The possible discontinuation
of this facility poses a serious threat to the economy of Sri Lanka,
with a potential loss of several thousand livelihoods and much needed
foreign exchange earnings. Plans by the Government are under way to
mitigate the potential adverse impact on the apparel sector, should the
concession be lost.
We have a sound base to work from, as already trade has reached
certain levels with bilateral trade between France and Sri Lanka
standing at around USD 337 Mn. The performance of trade for the period
under review has shown steady growth, with exports, where France is our
9th largest Export Market, in 2007, standing at USD 179 Mn with a year
on year increase of 21%. Whilst apparel is the main contributor, there
is room for sectors such as tea, particularly in value added form to
expand from the present 3% of total exports to France. Imports in 2007,
at USD 158 Mn have also shown an increase of 17% over the previous
year.The trade balance continues to be in favour of Sri Lanka, she also
said.
In this context there is much room for improvement as there is still
untapped potential which needs to be focussed on. France account for
just 2.26% of Sri Lanka’s total exports, and 1.36% of total imports. In
view of France being the 6th largest economy globally, the need is for a
strategy to proactively identify sectors hitherto untapped, where there
is emerging potential for Sri Lankan products, and where, our products,
notwithstanding the impact of possible loss of the duty concession, can
hold its own.
These include high end, value added products, marketed particularly
through niche marketing and branding. Of course this calls for an
improvement in our domestic business environment as well, particularly
reduction in high energy costs and other factors, which have adversely
impacted cost of production. The unfavourable exchange rate, which,
though marginally depreciated, continues to be managed, has further
impacted competition in exports. We need to be optimistic - We have
several success stories of entrepreneurs who have made significant
headway in developing business with France.
Though the number is small, there is room for growth in the
long-term. France’s strength in key industries also need to be exploited
to a greater degree such as in the areas of telecommunication, machinery
and pharmaceuticals, through greater awareness, and linking Sri Lankan
businesses with French counterparts. The key factor here, is quality and
technology. |