Investment opportunities for SL in Japan seen to be on the rise

The Island - 12/03/2015
By Ifham Nizam

Japan’s interest in China and the United States as future markets is decreasing, according to recent global surveys, when it comes to the ICT industry and business, says a top Japanese IT expert, thus hinting that Sri Lanka has a very good opportunity for investment in Japan.

Japan IT Services Industry Association, Global Affairs Department, Senior Executive Hidemi Yamamoto addressing a seminar for more than 60 Sri Lankan ICT export firms in Colombo recently said though Sri Lanka doesn’t come under the 20 companies surveyed by the JISA Global Business Committee members, Sri Lanka has the potential to penetrate the Japanese market.

He said that China and US were the most important current markets in 2012/2014. Indonesia is a focused destination as the future market though not many JISA members have current operations there.

Yamamoto said that Singapore, Vietnam and Thailand are also important markers for them.

Answering questions, he stressed Japan ICT companies don’t know very much about Sri Lanka when it comes to corporations, products, software and solutions etc.

He said that their task was to promote Sri Lanka and spread the capacity of Sri Lanka companies in the region.

However, he noted that a knowledge of the English language was the biggest stumbling block to the two nations adding they would work on that area to iron out the differences and to cement more opportunities in both countries.

Yamamoto also said: "We have 600 Japanese IT firms under JISA. We have leading Japanese software developers, information processing and database service suppliers among us. We have alliances with foreign industry associations and I am highly impressed by Lankan IT Industry."

Meanwhile, Ministry of Industry and Commerce estimates that Sri Lanka’s hi-tech exports are projected to cross the USD 1bn mark this year.

"We are looking to create business tie-ups between Lankan and Japanese ICT firms and today’s seminar is the first step-bringing awareness to Lankan ICT firms, said Kazuhiko Obama (Resident Representative-JETRO Colombo).

He added: "We are planning to conduct the follow-up, the Business Matching event in October this year in Tokyo. Before that Sri Lanka EDB will bring a Lankan ICT company delegation to Tokyo for Japan IT Week this May."

"We are a leading systems integrator in Japan and I have almost 40 years of experience in this, said Tsuyomu Tsuchiyama (Corporate Officer, Strategic Planning Division, Nippon RAD Inc) and added: "I look forward to give to Lankan ICT exporters. 99 per cent of my firm Nippon Rad’s business is domestic and in Sri Lanka we are looking for mutual market opportunities and tie-ups. Business and systems integration in the form of JV or BPO/Outsourcing, is possible."

   Export Development Board chairman Bandula Egodage said: "The top three Lankan exports to Japan in 2013 were tea (22%), apparel (17%), and seafood (17%).  The total trade with Japan stood at USD 566 million in 2014, increasing by 58% to USD 894 Mn in 2013. Our exports to Japan in 2014 stood at USD236 mn, increasing by 6% from 2013’s exports of the same at $224 Mn."

SL-Singapore Business Council, Singapore (Sri Lanka) Club hold networking event

Daily FT - 07/03/2015

From left: Amanda Senewiratne, Secretariat, Ceylon Chamber of Commerce; Rohitha Mendis, Vice President, SLSBC; Upali Bandaranayake, Vice President, SLSBC; B.C. Tan of  Prima Group; Janaka Gunasekera of A. Baur & Company; Naserah Tyebally, President, Singapore Club; Shamil Mendis, President of SLSBC; R.D. S. Kumararatne, Director General, Department of Commerce; Sujatha Weerakoon, Director General, Export Development Board; Champa Mohinani, Singapore Club; Nirupa Peiris, Overseas Reality (Ceylon); Renuka Weerakone, Executive Director (Investment Promotion), Board of Investment; and Weon Cheol Koh, Director General, KOTRA

A joint Networking Evening was organised by the Sri Lanka-Singapore Business Council (SLSBC) of the Ceylon Chamber of Commerce and the Singapore (Sri Lanka) Club.

The event was organised with the objective of providing an opportunity for members to interact amongst themselves, with the Singapore expatriate community in Sri Lanka and senior officials of key Government institutions relevant to business. The organising of this event is in keeping with an objective of the Sri Lanka-Singapore Business Council as a facilitator of business for its members.
The event which was held at the Roof Top Function Room of Prima Tower was well attended by over 85 persons including members of the SLSBC which has now grown to 67 member companies, members of the Singapore Club and special invitees.

Representatives of Prima, Overseas Realty, Singapore Airlines, Keppel Land and other Singapore connected companies attended the event. Senior officials of the Department of Commerce, the Export Development Board and the Board of Investment of Sri Lanka were present as well as representatives from the Japan External Trade Organization (JJETRO) Korean Trade & Investment Agency (KOTRA) and representatives from the Embassy of Japan and the Indonesian High Commission who were amongst the special invitees.

Shamil Mendis, Chairman/ Managing Director, Spear Global Holdings Ltd., President of the Sri Lanka – Singapore Business Council, the committee of the SLSBC and Naserah Tyebally, the President of the Singapore (Sri Lanka) Club welcomed the members.

The Sri Lanka-Singapore Business Council inaugurated in 1997 as the 18th bilateral Business Council formed under the aegis of the Ceylon Chamber of Commerce. The prime objective of the Council is to promote trade, tourism and to create an environment to enhance the commercial activity between Sri Lanka and Singapore as well as to facilitate investment by Singapore companies in Sri Lanka.

Following the successfully concluded Trade & Investment Promotion Missions to Singapore last year, the SLSBC will organise the next Business Delegation to Singapore during July 2015 in conjunction with the High Commission of Sri Lanka in Singapore and the Singapore Business Federation (SBF) Singapore’s apex and largest business chamber.

The Singapore Business Federation with a membership of over 16,000 members intends to conduct a seminar titled Doing Business in Sri Lanka – Development Potential and Opportunities in July followed by a business matchmaking and networking session.

Several inward delegations are expected from Singapore in the period ahead. The SLSBC is in regular contact with the Singapore Business Federation (SBF), IE Singapore, the Government Agency driving Singapore’s external economy, the Singapore Chinese Chamber of Commerce and Industry and the Singapore Indian Chamber of Commerce and Industry.

The SLSBC is pleased to call applications from interested companies to join its membership in order to participate in the above activities. For more details please contact the Secretariat on 5588800/59 or E-mail: amandas@chamber.lk.

Sri Lanka should reconsider its export items and destinations

The Nation - 08/03/2015
By  Amila Muthukutti

Sri Lanka, since colonial era, has been playing a significant part in international trade. The main reason why imperialists came to this tiny Island was its export-oriented natural resources such as spices mainly Cinnamon. Since then, exports of this nation have been primary and not value-added. It ought to be mentioned here that with the introduction of open economic policy in 1977, imports began to play an important role in Sri Lankan economy. However, Sri Lanka has become a country that imports more and exports less, resulting in a balance of payment crisis.

The country has been exporting to a limited number of markets such as Middle East, USA and EU. It remains important to note here that Sri Lanka has brushed aside some emerging markets like Latin America. Furthermore, some fluctuations can also be seen in the Sri Lankan export sector, majority of which have a bad impact on the economy. It is recently reported that European Commission has decided to impose a ban on fish exports from Sri Lanka to the European Union (EU), as Sri Lanka had not taken effective measures to tackle illegal fishing.The state of affairs is worse, as Sri Lanka is the second largest fish exporter to the EU. What should be is that fish exporters need to find out new markets. This reminds the nation that not only comparative advantages but also many other factors such as human rights, being environmental friendly and adhering to international standards can influence the international trade of any particular country. By extension, a country should not always depend on one market, as the international market is volatile by nature.

Sri Lanka’s share of the world exports is on the decline. Apparel and tea exports claim a large share of Sri Lankan exports though the country has lost its previous comparative advantages in both categories. It is known that the country could attract international investors to the apparel sector, due to the highly educated and cheap labor in the country. That is why, it has been the largest contributor to export earnings. However, the industry is currently facing numerous challenges in the competitive world market. Facilities for workers were upgraded and wages also had to be increased resulting in higher cost of production. It can be clearly seen that girls who have been the largest labor force in apparel sector, are reluctant to join with the industry, mainly because of the social stigma attached to the sector. Nevertheless, countries like Bangladesh are ahead of Sri Lanka in terms of low cost production. Therefore, it can be seen that the country has lost previous comparative advantages in the sector. In addition to that, Sri Lankan garments are exported to USA. Hence, economic recession in USA also had a bad impact on the sector.

The driving force that has been contributing to the export earnings for decades, is Tea. Although Ceylon Tea has gained wide currency all over the world, from the recent past, it has been facing challenges in the world market. The Middle East is the largest market for Sri Lankan tea. It remains important to add some value to the exporting tea, so that higher prices can be earned per Kilo Gram of tea. Packaging as tea-bags results in the highest value per Kg. However,the share of tea-bags in total exports has stagnated below 10%. The second highest value per Kg is fetched by instant-tea. But it accounts for less than 1% of total tea exports. Accordingly, the emphasis ought to be given for adding some value to the tea exporting.

Kenya is the most powerful competitor that Sri Lanka has in the global tea market. Kenya has so many advantages over Sri Lanka, especially, Kenyan lands are flatter compared to Sri Lanka. That will of course assure higher yields. By extension, technology is used at a lower level, resulting in low productivity. Our country has tea estates that were grown and maintained by the British. It is needless to state that the older estates give lower harvests. As a consequence, cost of production goes up in comparison to other countries like Kenya. Tea estates suffer from the lack of sufficient labor force, as the younger generation is reluctant to join with the sector. As tea industry is used to be labor intensive, it will have a bad impact on the sector.

Sri Lankan tea exporting destination has been chiefly the Middle East countries. However, opportunities should be found to turn the Latin American region into our tea market.

The time has come for the country to look beyond traditional export items. Instead of tea, rubber, coconut and garments, new services like education can be exported. Sri Lanka, fully utilizing its peaceful environment, must create a conducive environment where education providers and foreign students can meet each other. Singapore and Malaysia are countries that were behind Sri Lanka, but now export education as a quality service.

Sri Lanka used to be a labor intensive country. However, it seems that the country is losing its comparative advantages in labor intensive products. Therefore, what has to be done is that more and more FDIs ought to be attracted to the country, creating a capital intensive environment. It has been proved that a peaceful environment alone doesn’t pave the way to attract FDIs.

It has to be penned down that this is the best time for the country to diversify its exports and look for new export destinations in the world. While retaining its traditional markets Sri Lankan presence in the global market should be expanded.

National Chamber of Commerce announces Ayur

By Inshira Shainaz

Minister of Health and Indigenous Medicine Dr. Rajitha Senarathne launching the official website of Ayurved Expo 2015 together with officials of the National Chamber of Commerce – Pic by Kithsiri De Mel

For the fifth consecutive year, the National Chamber of Commerce of Sri Lanka announced the three-day mega exhibition ‘Ayurveda Expo’ which will be held from 3 to 5 July at the BMICH.
The exhibition is being held in association with Ministry of Health and Indigenous Medicine, Sri Lanka Export Development Board, Ministry of Industry and Commerce, Board of Investment, Sri Lanka Tourism Promotion Bureau and Dept. of Commerce and other institutions and with the participation of Minister of Health and Indigenous Medicine Dr.Rajitha Senaratne.

Ayurveda Expo 2015 will mainly focus on the manufacturers of Ayurveda and herbal, nature friendly healthy foods and beverages, health resorts and spas,Ayurveda hospitals and clinics, educational institutions, yoga, acupuncture, homeopathy, beauty care products, herbal cosmetics and production.
Minister Senaratne stated that the Ayurveda and indigenous healthcare scheme has been recognised by the public as a highly effective way of treatment, with many overseas countries incorporating indigenous medicines to lead a healthy life. The Sri LankanAyurveda system has been so popular that delegates from China, Thailand, Vietnam and Germany have visited the Ayurveda School in past years.

“An Ayurvedic Department is to be developed and next month I will be opening the first herb garden, organised by the Chairman of the Ayurveda Corporation in Kurunegala,” he added.
The objective of the exhibition is to promote the Ayurveda system of medicine locally and internationally, to educate the public on achieving wellness through nature friendly indigenous medicine and to create a platform for local and overseas organisationsin the indigenous healthcare sectorto meet their counterparts and establish business relations with each other.
Local and foreign participation, exhibitors and visitorsfrom countries such as India, Bangladesh, Nepal,Japan and China and more are expected.

Ayurveda Expo 2015 will create awareness about products, services, facilities and expertise available in Sri Lanka to treat ailments through the indigenous medical system and will popularise Sri Lankan Ayurveda medicine and practices among the local and international public while also promoting investment in the sector and in tourism.

A symposium and public seminar on Ayurveda and indigenous medicine will also be held, featuring local and international speakers. This exhibition will promote the wellness of Ayurveda, lifestyle and healing through Ayurveda and the Sri Lankan indigenous medical system.

Emerging food standards causing concerns for Sri Lankan tea industry

The Island - 01/03/2015 
By Janaka Wijayasiri

Over the last two decades, there has been a tightening of public standards, a shift from product standards to process standards, an increase in theimportance of private standards and a widening scope of standards. These developments haveraised concerns amongst developing countries, as standards can become non-tariff measures with falling tariffs. Failure to comply with standards could potentially result in loss of international market, a decrease in employment and a decline of an industry. However, compliance offers the possibility of enhancing international competitiveness and encourages the advancement of an industry.

Sri Lanka's tea industry, which is predominately export oriented, is increasingly governed by strict and complex standards. Thisreflects the evolving trends in the standards environment globally.

In order to export tea, companieshave to comply with local and foreign standards and regulations pertaining to food quality and safety. These are usually mandatory, product standards. In this regard, tea has to comply with ISO3720 product standard for black tea. In addition to ISO3720, the Sri Lanka Tea Board requires tea exports to comply with other product standards, including foreign matter, micro-biological contamination, heavy metal and pesticide residue limits, which are specified and monitored by the Tea Board.

International food assurancestandards such as Hazard Analysis and Critical Control Point (HACCP) and ISO22000 (Food Safety Management System) are also increasingly becoming important in the tea trade. While these standards are voluntary at the moment, compliance with either HACCP or ISO22000 is becoming necessary and considered as de facto mandatory standards. Initially, companies selected ISO9001, which is a quality management system (QMS) but with the introduction of HACCP and subsequently ISO22000, which are more relevant to the food industry, tea exporters are switching to HACCP and/or ISO22000 certifications. The drive towards obtaining these standards in the tea industry gathered momentum when the EU stipulated in 2006 that food imports including tea into Europe must meet the HACCP standard.

In addition to the mandatory and voluntary public standards, there are a number of private standards which have been voluntarily adopted by tea exporters.These go beyond the realm of public standards in food quality and safety, and cover a gamut of issues including social and environmental concerns. Commonly stated private standards by tea exporters include: BRC (British Retail Consortium) Global Standard, Organic, Fair Trade (FT), Ethical Tea Partnership (ETP), and Rainforest Alliance (RA), which have been collectively set and monitored by third party agencies. There are also private standards or private codes of conduct, specific to individual buyers; for example, supermarkets (i.e., Japanese supermarkets) and fast-food chains (i.e., McDonalds) have their own set of standards and requirements. The emergence of private standards reflects a growing interest by buyers, and ultimately consumers, about the conditions under which tea is produced.

Compliance Challenges

So far, tea exporters from Sri Lanka have been able to meet various standards, and ship tea to some of the most stringent markets in the world. However, they still face a number of difficulties in complying with such standards, which needs to be addressed in order to ensure that Sri Lanka remains one of the leading tea producing and exporting countries.

Lack of testing infrastructure and human resources: Although there are a number of laboratories operating in country - both government and privately run - they are not accredited to undertake tests for certain chemicals. For example, the Tea Board has set up a state of the art laboratory, but it is not accredited while the government-run Industrial Technology Institute's (ITI) laboratory can analyze only certain chemicals. Similarly, private laboratories are not accredited for certain chemicals. As a result, it is sometimes necessary to send tea samples abroad - to either to Singapore or to India - for testing. The absence of fully-accredited laboratories is compounded by lack of qualified scientific personnel to conduct tests. In the case of Tea Board, not only is the laboratory not accredited but the Analytical Laboratory Division does not have qualified staff to do testing despite the huge demand to get tea samples screened.

Compliance costs: The most common challenge faced by the exporters was the compliance cost which involved upgrading factories, audit/certification fees, consultant fees, training costs, etc. All of these add up to a substantial amount and contribute towards increasing the total cost of production. They are unable to pass this cost to the buyers as it makes them uncompetitive in the market. Whilst exporters were willing to bear various costs associated with standards, they were frustrated about the lack of monetary return for compliance.

Changing the mindset of workers: Apart fromimplementation costs, many companies faced internal resistance to their adoption.Initially, exporters found it difficult to change the mindset of workers to fall in line with the standards,although they are now more or less compliant. Training has to be continuous as workers tend to revert back to their old ways.

Proliferation of standards: This is also becoming increasingly challenging for exporters, as there is multiplication of costs (certification and audit fees, etc.) and effort (in maintaining various documents). Exporters are also disillusioned that different versions of the same standard are brought out regularly, requiring them to continuously upgrade in order to comply with the latest version of the standard. While there have been some efforts towards harmonization between various private standards, proliferation of private standards is likely to continue in the foreseeable future.

Assistance for Compliance

While tea exporters have managed to comply with standards and regulations, they still have to overcome a number of challenges in order to stay competitive in international markets. In this regard, exporters require assistance to comply with the changing standards environment.

Forms of assistance required include financial assistance (loans with low interest rates, and longer pay back periods), and technical assistance to comply (training). There is also the need to harmonize standards as there is duplication of costs and an effort to comply with different requirements of various countries and buyers, and obtain accreditation for laboratories operating in the country.

Given that standards are likely to multiply and become further complicated in the future, the government and the industry should provide exporters the necessary support to comply withsuch standards and ensure continued access to the global tea value chain.

(Janaka Wijayasiri is a Research Fellow and the Head of International Economic Policy research at the Institute of Policy Studies of Sri Lanka (IPS).This article is based on his PhD thesis on 'Food Standards and Governance in the Tea Industry in Sri Lanka: A Value Chain Analysis' from Monash University.To view the article online and comment, visit the IPS blog 'Talking Economics' - www.ips.lk/talkingeconomics)