Sunday, December 21, 2014

'The new year, a challenge for business’

Sunday Observer - 21/12/2014
By Lalin Fernandopulle


With the year coming to a close and a few more days for the new year, the business community expressed mixed sentiments about the past year and the year ahead. Some corporate and Chamber heads were pleased with the growth in business given the political stability and business environment.

Chevron Lubricant Lanka PLC, Managing Director and CEO Kishu Gomes said that 2014 was a fairly good year though there was no phenomenal growth in the lubricant business and added that there was economic predictability during the year than in 2013. He said that he was optimistic about 2015 and added that more would depend on the political and macro economic stability in the country.

The global economic scenario has a mixed outlook with certain countries emerging strong from the economic crisis and showing enormous potential for trade and investment while the Middle East and Russia are grappling to survive with the slump in oil prices and sanctions.

Russia is going into recession with the drastic drop in oil prices and US and Western sanctions. The Rouble has been devalued against the dollar and the Russian banks have raised key interest rates to boost the economy.

National Chamber of Commerce of Sri Lanka, Deputy President Sujeeva Samaraweera said that ending the 30-year battle against terrorism resulted in a peaceful situation in the country and a conducive environment for business activity. Infrastructure development such as ports, airport and roadways is an impetus for economic growth.

He said that the government has affirmed a series of benefits to SME entrepreneurs and large-scale businesses through the 2015 Budget. The cost reduction in power and fuel in the coming year will be help reduce production and overhead costs.

Reduction of interest rates and the business-friendly banking transformation will encourage entrepreneurs to venture into new ventures and expand businesses.

“The wage increase in 2015 will result in increasing disposable income which in turn will help maintain a stable cash flow in the market.

Therefore, 2015 will be a productive year for the business community.

As many foreign companies are exploring the possibility of investing in Sri Lanka in 2015 we expect a considerable increase in FDIs, Samaraweera said.

Heladive Group Chairman Rohan Fernando said that 2014 was a year full of challenges for the tea industry and in particular the tea export sector. The auction prices in Colombo declined in line with the world supply and demand which applies to all commodities.

However, Sri Lanka will finish the year as the best performing tea auction centre in the world having recorded an annual average price much higher than all other auction centres.

On the other hand, the biggest markets for Ceylon tea, the Russian Federation countries, Iran and Syria suffered direct and indirect trade sanctions imposed by the US and western countries. Sri Lanka's exports to these countries amount to 30% of total tea exports by volume.

Russia, due to the falling prices in crude oil devalued its currency on a regular basis and from a ROE of 30 Roubles to a US dollar at the beginning of the year to 70 Roubles by the second week of December.

Iran too suffered with oil income declining and severe trade sanctions being imposed via the blacklisting of all banking institutions in the country. The situation in Syria is far worse with supply chains and financial transactions badly disrupted due to the ongoing war.

"Two thousand and fifteen does not look too good with falling tea prices and trading conditions not improving in the global market place. This will be another challenging year for Sri Lanka where cheaper teas from other producing countries will compete for market share.

On the other hand, an opportunity will arise to enter the top end market hitherto occupied by Western brands, now being curtailed entry into Russia in a tit-for-tat action. It will be prudent to deploy the promotion and marketing funds collected from tea exporters for over the past three years in these countries for Ceylon tea brand to carve out a niche market,” Fernando said.

Industrial Development Board (IDB) Chairman Nawaz Rajabdeen said that the IDB has identified a large number of potential entrepreneurs from the North and the East through its regional programs. Two thousand and fifteen will be a positive year as the IDB has provided state-of-the-art technology and local and foreign exposure to entrepreneurs to showcase their products and be competitive in the global market, he said.

The Industrial Development Board has facilitated the SME sector and worked in all 25 districts to create new micro and small industries through the regional development unit.

More than 345 new industrial units were set up in the country with the support of Enterprise Promotion Officers.

The industries were identified through the availability of raw materials and proper training was extended with marketing support. Technical training was imparted to over 960 industrial units to increase productivity and compete with imported products.

Over 600 self-employment projects were created in a few districts under the livelihood program of the IDB. Over 12,000 new entrepreneurs were given assistance to develop new technology with the market research being conducted by the IDB.

Over 80 industrialists were provided assistance to visit the International Machinery fair in India and China to find advanced technology and new machinery to upgrade industries.

Under the village development program and the self-employment sector for women entrepreneurs over 90 people were provided interest free loans of Rs 250,000 by the Regional Development Bank.

This year, the IDB had an accelerated program to restructure the industrial sectors to increase productivity, packaging, branding for the local market competing with substandard imported products.

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