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‘Pandemic akin to the Great Depression’: CBSL Governor 

12 Aug 2021

  • Situation far worse than the 2008/9 financial crisis 
BY Cassendra Doole The Covid-19 pandemic which has infected millions of individuals around the globe, successfully taking the lives of hundreds of thousands, has also been heavily affecting the global economy. Countries have taken various different measures in order to contain the virus which includes travel restrictions, curfews, border closures etc. Such measures, while seemingly effective in managing the crisis, have also disrupted production, supply chains and financial markets. In this regard, one of the hardest hit sectors is the export market sector.  In an attempt to understand what solutions can be made in this regard, the Central Bank of Sri Lanka recently conducted a webinar titled “Strategic Interventions on Covid-hit Exports in Sri Lanka: How to Overcome Barriers?”. Central Bank of Sri Lanka Governor Deshamanya Prof. W.D. Lakshman provided the introductory remarks, while Sri Lanka Export Development Board CEO and Chairman Suresh D. de Mel delivered the keynote speech.  Akin to the Great Depression  Central Bank of Sri Lanka Governor Deshamanya Prof. W.D. Lakshman in his welcome remarks said that this situation is similar to the Great Depression when economies collapsed and the world was on edge all over.  “This topic is extremely significant in today’s economic policy discussions. In fact we are pursuing a policy framework in which exports will play a significant role. The pandemic has created major setbacks to the global economy, especially world trade, global production and consumption, and supply chains and while this has been the case worldwide, our exports and other economic activities have suffered significantly,” he said, adding “The World Bank, Organisation for Economic Corporation and Development, and the IMF have all released forecasts showing a significant slowdown in global economic activities. This situation is worse than the 2008/9 financial crisis. In fact, my comparison of this particular pandemic crisis is not with the 2008/9 crisis but against the Great Depression period of the early 1930s. The outlook for our exports seems uncertain and requires significant intervention on the policy front to get us out of this uncertainty and to go for a significant growth process in the exports. We have our export market which concentrates on the US, the UK, Germany and the European/Western countries. The Sri Lanka Export Development Board played a pioneering role when it was first established. And they will continue to do so now. Their role is critical”.   According to the World Health Organisation (WHO), the pandemic could last for at least two years. A paper released by international consultant and researcher Janaka Wijayasiri stated that the outlook for the global economy over the next two years is highly uncertain and this is likely to weigh heavily on trade growth.  How the pandemic affected the world, and Sri Lanka  Sri Lanka Export Development Board CEO and Chairman Suresh D. de Mel touched upon a number of subjects in relation to exports in Sri Lanka during his keynote speech.  “World exports have decreased due to the pandemic from 2019 Q4 to 2020 Q4 the year was a disaster,” he said adding “They are having a V shaped recovery period, however, Sri Lanka began to recover by 2020 Q3 – where we recovered faster than the rest of the world but we have been fluctuating quite more since then”.  Export Development Board intervention  The EDB intervened to facilitate exports. This included providing support for smooth and uninterrupted operation of export companies during lockdown and travel restriction periods providing clearance for uninterrupted factory operation and transport.  “The most important request by the export communities was to facilitate vaccinations when I took over office,” De Mel said, adding that the EDB also facilitated vaccinations by establishing a mechanism to prioritise export industries for vaccination through Ministry of Health offices.  “Now nearly all the factories are vaccinated. I have also been watching the US markets very carefully and it is a proven point that vaccinations are very helpful in stabilising the situation. The situation at the port and customs, the logistics sector was struggling because many of our exporters were in the dark. If people understood the situation and had someone to speak to, that would make a big difference so I made this happen.”  The EDB also communicated container requirements through the collections of container requirements for exporter companies and lobbying with the relevant authorities, in addition to publishing and updating 59 market alerts through the EDB website in collaboration with Sri Lanka Missions overseas and circulated among the exporters, the relevant chambers and other parties.  “We established a help desk by formalising and improving the sectoral help desks to deliver the support services effectively. The 21st Exporters Forum was also conducted virtually with the relevant stakeholders. Additionally, we also created an online portal where exporters and potential exporters can request foreign buyer contact details. We also developed sectoral recovery plans for implementation, and provided advisory services and resolved prevailing issues. This included developing and supporting new exporters, resolving issues in export procedures, and linking suppliers and exporters with international buyers,” he further noted.  The EDB facilitated export processing hubs and zones in order to increase export earnings through value addition and re-export. “We held over 19 virtual B2B meetings which covered 15+ product sectors, 16+ countries in over two regions. Through this 163 Sri Lankan companies were benefitted. We conducted over 30 webinars for the benefit of exporters and export potential enterprises to make them more aware of international trade, export procedures etc with the participation of over 60,000 exporters. We also worked with Sri Lanka Missions abroad for linking Sri Lankan exporting companies to secure Export opportunities available in international markets during the pandemic,” added De Mel.  CBSL and Treasury support  Meanwhile, the Central Bank of Sri Lanka and the Treasury also took measures to facilitate exporters during this time.  “These included the lowering of taxes and interest rates, extending the statutory deadline for filing tax returns and statements, granting relief by suspending the notices issued to banks for the recovery of taxes in default from any defaulters’ bank accounts and extending the VAT validity periods. The Department of Inland Revenue also introduced an Alternative Tax Payment System (ATPS) for making tax payments through online transfer facilities,” explained De Mel.  The Central Bank of Sri Lanka responded well to reduce the adverse economic impact according to De Mel. “They provided debt moratoriums, Expansionary Monetary Policy – The Standing Deposit Facility Rate (SDFR) and the Standing Lending, they reduced the Facility Rate of the Central Bank (SLFR) and liquidity was made available in the system.”  “We hope that the current crisis is temporary and we will get back to normalcy within a very short term.”  De Mel then went on to explain the National Export Strategy which was implemented for 2018-2022.  “The NES will empower the emergence of new export industries and services beyond the traditional export industries of apparel, tea, gems and rubber. High tariffs, complicated administrative procedures and limited access to inputs will be addressed to favour the growth of higher-technology and knowledge-intensive exports, which are less vulnerable to cost shifts,” he said.  Accordingly, the implementation of NES will create sustainable and fast export growth for the benefit of all Sri Lankans guided by the four strategic objectives of having a business enabling, predictable and transparent policy and regulatory framework that supports exports, strengthen exporters’ market entry and compliance capacities, become and efficient trade and logistics hub and to drive export diversification through innovation and by strengthening emerging sector exports.  New trends and niche markets  De Mel also stated that the current situation brought about a number of new trends which are fast evolving in the new normal.  “We immediately got into export market trends such as personal protective equipment, masks, gloves, wellness, nutrition and healthcare products, organic certified and single origin traceable food, immunity boosting and antioxidant products, green/environmentally friendly products, fair trade certified products, video conferencing etc. These are a few opportunities in the new normal.”  He also provided a number of business strategy trends to overcome barriers such as customer communications and relations, labour communication and relations, innovation, consumer behaviour, health and environment, and increased government scrutiny.  He further explained the significance of niche markets which include the fact that niche markets are often high quality, specific to the consumer’s needs and typically get premium prices.  “Niche markets are more sustainable and resilient during a crisis and also have less competition because there is better customer loyalty. Sri Lanka is ideally suited for niche market production,” he concluded. 

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