highlight budget anomalies
have highlighted certain ‘anomalies’ in the 2002 budget and have
urged the Ministry of Finance to rectify these matters. The main
problems relate to the port and airport development levy, debit tax
and value added tax (VAT).
Industrial Association of Sri Lanka (IASL) has written to Finance
Minister, K.N. Choksy, highlighting these issues raised by its
first matter relates to the port and airport development levy. A levy
of 1% has been introduced on the declared C&F value of all cargo
imported into the island. It replaces the 1% stamp duty paid on
letters of credit and commercial invoices presented to the director
general of customs. A subsequent press notification issued by the
treasury secretary under the heading ‘The Implementation of Budget
2002 Proposals’ has exempted the following imports from this levy:-
imports by any diplomatic mission or any other organisation within the
provision of the Diplomatic Privileges Act No. 9 of 1996 will not be
liable to this levy.
of diamonds, gems, gold, jewellery and any electronic items or
components imported for the purpose of re-export after processing.
addition to the above exemptions, we are of the view that the special
concessionary rate of 0.05% (which was available under stamp duty)
should be available for imports used by the export sector (including
import of plant, machinery and fixtures) and for imports used for the
sale of gods in any duty free shop so as to continue the incentive
given to the sector,” the IASL stated. It added that this concession
is essential for the export sector especially to the garment sector
(which is today the largest employment generator) since 60%-70% of the
FOB value of garments exported consists of imported materials. This
sector is already struggling to survive due to the recession in the US
and strong competition from other countries. It was pointed out that
they have to face subsidised competition from overseas factories
particularly in Vietnam and China.
association said that since the port and development levy is already
in force (effective from 1/5/02) immediate notification should be made
with regard to the applicability of this concessionary rate and
directions should also be given to the director general of customs.
With regard to the debit tax, the association which is affiliated to
the Ceylon Chamber of Commerce (CCC) emphasized the following matters:
the debit tax is in force as from 1/5/02, no precise guidelines have
still been issued to the relevant financial institutions covering the
applicability, implementation and recovery procedures. IASL members
have pointed out that this tax is a retrogressive tax that would
increase transaction costs ultimately resulting in increased prices
and inflation. This tax would also hamper banking services and would
result in a cash economy with consequent concerns on security and
is required on the applicability of the debit tax on inter account
transfer (accounts belonging to same party) within the same bank, and
the treatment of various GL account of banks and inter-bank
the above-mentioned matters are reviewed and guidelines made
available, the association has suggested that the implementation of
debit tax be differed until 1/8/2002 or the debit tax be rescinded in
regard to the Value Added Tax (VAT), the IASL which has a membership
of 76 medium to large scale industries stated, “In terms of the
budget proposal 2002, the Goods and Services Tax (GST) has been
replaced by VAT effective from 1/7/02. It has also been proposed to
abolish the National Security Levy (NSL) and include this levy amount
to the higher rate of VAT (20% rate). Since NSL was a special tax
introduced to enable the government to fund some of its defence
expenditure, our members need assurance that in the event of any
escalation in defence expenditure, re-introduction of NSL would not be
made in addition to the current VAT.”
association added that under the NSL Act No. 52 of 1991 (as amended by
Act No. 4 of 2001) in order to assist the manufacturing sector, a
concessionary rate of 0.5% was levied as NSL on the import or
manufacture of any plant, machinery or equipment excluding motor cars,
motor coaches and lorries. These imports would now be liable for VAT
at the higher rate of 20%. It is submitted that the concession
available under NSL be continued and the aforesaid
imports/manufactures be made liable to VAT at the lower rate of 10%.
to the IASL, in addition, under the GST statute, exemption from GST
was provided for import of or supply of a motor coach with seating
capacity not less than 28 passenger seats used in public passenger
transport. It noted that the same exemption was also provided for
leasing facilities for such motor coaches. Under VAT, although leasing
facilities for motor coaches (28 seaters or more) used for public
passenger transport services remain exempt, the import and supply of
such motor coaches are liable for VAT at 10% “Since leasing
companies would not be in a position to claim the input VAT on
purchase of such motor coaches such companies would be compelled to
add the cost of VAT to the lease rentals which would make the leasing
of such vehicles prohibitive,” the IASL said, calling for urgent
action to rectify this anomaly.
mobile telephony services launched
Networks recently announced the launch of satellite mobile telephony
services - the latest pioneering extension to its state-of-the-art
company will market the ground breaking Thuraya satellite mobile
telephony service, available for the first time in Sri Lanka and the
region under its newest power brand, DialogSat.
brings with it the extensive coverage of the Thuraya satellite mobile
telephony service. Mobile telephony services would now be available
throughout the length and breadth of Sri Lanka and its territorial
waters in addition to all areas covered within the Thuraya footprint
which covers 99 countries across 3 continents (Europe, North Africa,
Middle East and Central Asia).
together with Thuraya have “truly made a breakthrough in Sri
Lanka’s telecommunications industry,” commented CEO, Dialog, Dr.
Hans Wijayasuriya, “We have succeeded in adding the affordability
dimension to this critical telecommunications technology and have made
it readily accessible to our Sri Lankan consumers.
satellite phone call charges range from Rs. 50 a minute for a mobile
to mobile call, to a maximum of Rs. 140 per minute for an overseas
call. The handset would cost around Rs. 79,000 inclusive of satellite
connection and all taxes, and has a GSM mode as well as built in GPS
(Global Positioning System) as additional features. The handset
weights only 220 grammes, and is comparable to a GSM handset in terms
in size and appearance.”
the functionality of the company’s latest service, Manager, Network
Operations and Lead Project Manager for the introduction of Thuraya
services in Sri Lanka, Pradeep De Almeida, said, “Our handset can
operate in both SAT as well as GSM modes. This means that when outside
GSM coverage - whether it be in a remote part of Sri Lanka, or in the
high seas, or in any other country within the Thuraya footprint -
subscribers would have access to seamless telecommunications
facilities. Calls made while in SAT mode will be more expensive than
standard GSM calls. However when within GSM coverage, the phone would
switch to GSM mode and the subscriber would enjoy normal Dialog GSM
call rates. The system also provides SMS in SAT as well as GSM mode
and data and fax transmission capability.”
affordability and superior technology will make it attractive to a
wide cross-section of telecommunications subscribers across Sri Lanka.
The service will provide an umbrella of telecommunications coverage
across the entirety of Sri Lanka enabling 100% contactability across
the country for the first time.
further on the versatility and multiple applications of the system,
General Manager, International Business, MTN, Anoja Obeyesekere, said
“Satellite telephony will also enable several rural
telecommunication applications in time to come. The satellite
telephony service does not require the establishment of terrestrial
infrastructure and that means that it could be a rapid solution to
bridging the digital divide. Furthermore a subscriber will be able to
determine as well as transmit his/her location to a high degree of
accuracy using the standard GPS feature. This will be of critical
importance for navigation as well as disaster recovery
will change the way people, travellers, and even families keep in
touch. Additionally, DialogSat’s services will be ideal for those
working in remote industrial sites and marine operations, relief
projects, disaster recovery sites, as well as those involved in
regional and international transportation.
Thuraya mobile satellite system is a one billion dollar project built
by Boeing Satellite Systems, formerly Hughes Space and Communications
International, Inc. (HSCI), at the cost of US$ one billion. Designed
for a lifespan of 12 to 15 years, Thuraya’s satellite will maintain
geosynchronous orbit at 44 degrees east. Thuraya-1 satellite was
launched on October 21, 2000; on board a sea launch Zenit-3SL rocket
from the equator in the middle of the Pacific. It was the heaviest
commercial payload ever launched and the first commercial satellite to
employ digital beam forming.
Networks has spearheaded the industry in Sri Lanka over the past few
years propelling it to a technology level on par with the developed
world. The company operates Dialog GSM, comprising of over 200 base
stations, international roaming facilities in over 100 countries and a
subscriber base in excess of 300,000.
Networks, an ISO 9001 certified company is a fully owned subsidiary of
Telekom Malaysia Bhd and is the winner of the ‘Sri Lanka National
Quality Award for Business Excellence’ in the large scale service
category in 2001. The company is also the recipient of two consecutive
GSM world awards in 2001 and 2002.
faced by the textile industry and rectification measures
manufacture in Sri Lanka started with the setting up of Wellawatte
Spinning & Weaving Mills in 1888. Then came Veyangoda, Pugoda,
Thulheriya, Paragon, Cyntex, JB Textile Industries, Nagindas, Kandy
Textile Mills, Hybro, and many factories run by the Department of
then many medium and small-scale factories started, all enjoying the
closed economy, and a sellers market. About 200 million metres/annum
were produced by these factories at one time, feeding the domestic
market, and saving a massive amount in foreign exchange to the
started to go wrong a few years back with the large-scale garment
manufacture for export and many of these garment manufacturers
siphoning part of the imported textiles (brought to the country
without duties for re-export) to the local market.
was sometimes a more profitable situation than garment manufacture and
never brought under control, as it would have affected the genuine
garment exporters as well. With more and more garment manufacturing
plants opening up, the quantum of fabric seeping into the local market
also proportionately increased.
the maiden budget of the People’s Alliance in 1995, when the duty on
textile imports was suddenly reduced from 50 % to 35%, just prior to
the Sinhala & Hindu New Year, the textile traders imported fabric
from India, Pakistan and China, rather than buying from the local
textile mills as it was cheaper. The textile sales in Sri Lanka have
always been seasonal and the major sales quantum takes place during
Christmas and New Year.
the textile mills which built up large stocks for the new year were
saddled with massive quantities of unsold fabric and hence liquidity
problems. The duty was then brought down to zero in November 1997,
with the sole intention of facilitating the garment manufacturing
sector to develop and expand in order to generate high employment
levels and foreign exchange earnings. However, this had a direct and
extremely adverse effect on the domestic textile manufacturing
industry. Sri Lanka must be the only textile manufacturing country in
the world to have zero duty for textiles, in spite of the World Trade
Organisation allowing reasonable
measures to safeguard local industries.
of the very large textile mills in the country at the time, Pugoda,
Veyangoda and Kuruwita ,which were generating large profits up to 1994
went to a massive loss in 1996 and ultimately had to close down as
they were unable to compete with cheap imports.
three factories, which produced very good quality fabric for the
domestic market, and which were on par with present day imports for
domestic consumption, have now closed with thousands of workers thrown
out of job.
cushion the impact of duty removal, the then government took a
decision to transfer the debt burden of textile factories to a fund
termed Textile Debt Recovery Fund (TDRF). However this process took a
very long time to complete, unlike in the case of duty removal that
took place overnight and therefore was not sufficient to prevent the
closure of most of the factories.
now the TDRF has not been fully implemented, and most banks have
decided against granting of facilities to the domestic textile
industry. For this the banks can’t be blamed, as it is difficult to
show the banks the viability of textile manufacturing projects under
the prevailing conditions.
of us in Sri Lanka find it difficult to distinguish between the
textile industry and the garment industry and sometimes even senior
officers dealing with the subject are heard talking of garments and
textiles as if both are one and the same.
manufacture consists of yarn manufacture, weaving of the grey fabric,
and processing (bleaching, dyeing, printing and finishing). Garment
manufacture is the manufacture of garments from any material, textiles
included. Some also feel that the domestic textile manufacturing
industry should be there only to cater to the garment industry. This
is definitely not so. These are two different areas, and should not be
domestic textile industry should be there to cater to the needs of the
local population, and need not necessarily be for export or for
garment manufacture for export. If a part of the domestic textile
production can be used for garment manufacture for export it is all
well and good.
must also realise that it is just not possible to upgrade a domestic
textile-manufacturing factory to that of a textile factory catering to
the export garment industry. This is one very important factor that
has to be kept in mind. A textile factory to cater to the garment
industry - either spinning and weaving or dyeing, printing and
finishing - will cost well over a billion (one thousand million)
rupees. If one is thinking of textile manufacture to cater to the
export oriented garment factories then it will have to be completely
do not think businessmen would invest that kind of money not knowing
what the situation will be for the garment manufacturing industry in
the future. There are over 120 countries manufacturing garments for
manufacture is mainly concerned with stitching of textiles, and for
this we get a price, an amount that has been steadily declining with
many new countries starting garment manufacture, as garment
manufacture is not a very complicated or technically advanced process,
compared to textiles. The quality of garments produced in these
countries has also been steadily improving. The prices have therefore
come down considerably, while our costs have been rising steadily.
addition to this, come 2005 and the end of the multifibre agreement,
with China also getting into the mainstream of garment manufacture to
the USA, having been accepted to the World Trade Organ- isation,
things do not look that rosy for the garment industry in Sri Lanka.
China not only has a very advanced textile manufacturing base, but
also manufactures machinery for the garment industry. Further, it is
hard to believe, with whatever trade agreements, that USA will simply
allow imports to dominate its domestic market. There will definitely
be instruments of trade policy that would come up to protect trade in
officials feel that backward integration of the garment industry is a
pre-requisite for the garment industry to develop. They also think
that the first step towards backward integration of the garment
industry is the textile industry. It is well and good if modern
textile factories capable of supplying to the garment industry are in
operation, but whether they will ever be in a position to compete with
countries like China in the future is another matter.
textile industry and garment industry are separate industries though
inter-related in as much as the manufacture of iron and manufacture of
products made of iron are different. For example, Nylon and Rayon yarn
are used in the manufacture of garments as well as car tyres.
one seems to realise that even if we set up state-of-the-art (this has
now become a catch phrase) textile manufacturing factories costing
billions of rupees, we still will not be in a position to cater to the
garment sector in Sri Lanka in appreciable quantities. The reason for
this is that the variety of fabric and yarn used and finishes required
for modern day garment manufacture changes frequently.
getting back to the domestic textile manufacturing industry, at the
moment it faces definite closure, with no duty on imports, release of
large quantities of garments to the local market from the export
oriented garment factories legally and illegally, taxes being levied
for the imputs of the textile manufacturing industry as well as sales
of the finished product. Imported fabric also, however, still comes
into the country and to the domestic market via garment factories with
no duties and taxes at all.
level playing field is required if the domestic textile manufacturing
industry is to survive. It has become a race with both legs tied up.
From an employment generation of over 45,000 persons directly in 1994,
the employment level has now dropped below 18,000 and continues to
fall day by day, as factory after factory keep closing down. This
trend can be brought to a halt and maybe even reversed if proper
constructive action is taken immediately by the persons concerned,
without any further delay.
is absolutely no point in destroying one industry, thinking that
another industry will survive by this, which might in fact not be the
case. Only time will tell, and it will then be too late.
for this Sinhala and Hindu New Year millions of metres of low/medium
quality, low width (36"-45")
fabric has been imported from China, India and Pakistan for domestic
consumption, which could have been easily manufactured here. The main
problem in competing with these imports is the very low price at which
they are imported due to subsidies and other incentives from those
it is a case of dumping and the anti- dumping laws, as per World Trade
Organisation (WTO) agreement should suffice, but it is an impossible
task and not worth trying. (If a single case is taken,
Polyester/ Cotton 45" fabric is available in grey form in
Sri Lanka at a lower price from China , than the cost of yarn needed
to manufacture it .)
it has come to decision making time and the domestic textile
manufacturers (at least the few who have had the guts to survive all
the onslaughts, while factory after factory closed down due to bad
political decisions of successive governments) to take stock of the
present situation and request the authorities concerned to take a
reasonable decision to implement requests made by the textile
manufacturers in order for the balance textile factories to survive
and maybe re-start factories that have already closed down.
this process the factories can be categorised into three segments.
Those who still want to run their textile factories, with the help of
a reasonable incentive package from the government, so that the
factories can be run profitably, and the loans transferred to the TDRF
can be paid back.
Those who would want to use the present infrastructure facilities
available in their factories, (land, building, electricity, water, and
boilers) and start a new, hopefully viable industry and thereby keep
reasonable employment levels.
Those who would want to close down the existing factory and call it a
day, as they have no hope whatsoever in industries in this country.
one and two are the most important, as otherwise it is going to add
many more young people to the list of unemployed, and this will pose
another major problem for our country, not only in terms of employment
but also in crime prevention.
suggest that the following measures be taken in order to help the
domestic textile-manufacturing sector to develop and stay at viable
An incentive package to be given which could take the form of finance
relief measures, and can be arrived at taking into account the plight
of the domestic textile manufacturers as well as the difficult
financial situation of the country at the present time.
Implement the Tripartite Agreement fully.
Make available low interest loans under a special scheme, for working
capital requirements as well as purchase of new machinery for
replacement and modernisation. ( Bangladesh is now giving
loans for development of their domestic industries at 7%
effective April this year.)We must remember that if we are to be
competitive, then our costs also have to be on par with other
countries in the region.
Zero rating of GST/VAT for all inputs and sales.
authorities concerned should take a reasonable and extremely
quick decision with regard to the domestic textile
manufacturers, as they are in this plight due to no fault of theirs.
Sarath Gooneratne The writer is a honours graduate in textile
economics & management from the University of Manchester UK, and a
chartered textile technologist. He is also a former vice president of
the Ceylon Textile Manufacturers Association.
Lanka/Hei Tech tie-up
Lanka (Pvt) Ltd, an ISO 9001-2000 certified company, specialising in
design, development and marketing of end to end solutions in the
secure payment transaction automation industry, has been appointed by
Hei Tech Padu Berhard of Malaysia as their exclusive international
business partner for Sri Lanka, Bangladesh and Maldive Islands. Hei
Tech Padu, being the largest national Information and Communication
Technology (ICT) Solutions provider in Malaysia, is responsible for
computerising many large government departments and organisations in
proud to become the exclusive partner for Hei Tech Padu in Sri Lanka,
Bangladesh and the Maldive Islands. This is a great achievement for us
as Hei Tech will add enormous strength to our current diversification
program. Hei Tech has many ultra superior state-of-the-art solutions
and expertise that will offer tremendous cost benefit advantages to
countries like ours,” Managing Director, Epic Lanka, Nayana Dehigama
Lanka’s principles are based on building an excellent company,
meeting the needs of customers, promoting team spirit, recognising the
importance of each individual, focussing accountability, fostering
open communication, strengthening international partnerships and
living and working ethically.
vision is to be a better company with better people while creating a
better economy and better world through affordable state-of-the-art
quality electronic and electronic commerce solutions,” Dehigama
said. Epic Lanka also strives to be the No. 1 company in the region
that enlightens its customers by timely delivery, total quality and
defect free electronic commerce products and solutions. “Our aim is
to be the most important international partner in the region through
an improved and mutually benefiting business,” Dehigama said.
Lanka is the market leader in supplying and servicing EDC/POS
terminals with over 60% of the market share. The company has supplied
and installed over 3500 EDC/POS terminals and their products and
services offered are internet based e-commerce and secure payment
automation, network payment controllers, banking and financial
solutions, government sector computerised solutions, security printing
solutions, system integration and bank branch automation products
company is equipped with adequate manpower and equipment to support
and service all of Epic Lanka’s products and service installations
in Sri Lanka and the region. The company will maintain a stock of back
up units spares and consumables in order to offer an uninterrupted
comprehensive and superior service to its clients. Epic Lanka is also
geared to offer its customer support services 24 hours a day including
mercantile and public holidays and to their regional customers through
their business partners.
being the international business partner for Verifone Inc, USA,
Gemplus, France, SafeScrypt, India, Ingenico, Malaysia and Datastrip,
Epic’s focus is strongly on its business area as a corporate policy.
Manned by fully trained and experienced business leaders and
engineers, Epic has an energetic and efficient team that dominates
over 60% of secure payment automation in the Sri Lankan market.
the dominant ICT solutions provider in the government sector in
Malaysia, Hei Tech operates a state-of-the-art call center in Kuala
Lumpur that supports over 40 government departments and organisations.
Presently, Hei Tech Padu expects to bring its world class ICT
solutions to Sri Lanka via BOT/BOO based projects.
solutions and expertise offered by Hei Tech Padu include government
sector computerisation, applications, banking and financial
applications, finance and asset management, unit trust management,
education and university student management, human resource
management, business and commercial applications and networking and
systems integration, amongst many others.