Confectionery manufacturers insist on level playing field in post-FTAenvironment

By Devin Jayasundera

With several free trade agreements being fast-tracked to be finalised in the next few months, Sri Lanka’s confectionery industry insists that the Government urgently pass the anti-dumping bill to ensure a level playing field in the face of foreign competition. 

The Lanka Confectionery Manufacturers Association (LSMA) warns that if protective measures are not taken local confectionery manufacturers will suffer severe blows that will cripple the industry. 

The association says that it does not object to the Government’s plan to further liberalise the economy but says that it should first guarantee the safeguarding of local industries prior to signing FTAs. The association has already submitted its proposal to the Ministry of Industry and Commerce but no significant development has emerged. 

“Last year it was mentioned by the Ministry of Finance that it (anti-dumping bill) will be passed. We understand the Cabinet has approved it. But it is still not being presented to Parliament. We want it to be passed before the signing of the proposed FTAs otherwise the local industry will vanish,” said LSMA Secretary Adrian Fonseka. 

Big Indian confectionery manufacturers will find conditions to sell their products in Sri Lanka extremely favourable if the ETCA is signed without antidumping regulations. “Imported products would be very cheap. Products from India will especially be marketed at a cheaper price here,” said former LSMA Chairman Ramya Wickramasingha. “We are not against the ETCA but what we are saying is let’s have a level playing field.”

The sweets hungry nation is widely known for having one of the highest per capita consumption rates for biscuits in the region. According to the LSMA, the total confectionery industry recorded a value growth of around 12% in the last year mainly driven by milk chocolates. 

However, consumers still prefer smaller pack sizes when it comes to confectionery, thus limiting high quality product offerings.

“70% of our products are driven by small items with margins of around 2%-3% in this segment,” claims Ceylon Biscuits Ltd. CEO Samitha Perera and LSMA member. “That’s where the difficulty comes in. The market is growing on a low value side. It’s mainly a volume game,” he said.

Another hurdle the industry is facing is the high rate of import duties, especially for confectionary fats. Last year import levies of confectionery fats increased from 60% to 160% under the special commodity levy structure. Due to the constant pressure from the LSMA, the levy was subsequently removed and the previous tariff of duty and cess was reinstated, bringing down the original levy of Rs. 175 per kg to Rs. 135. 

According to the LSMA, raw materials are having higher duty rates and finished goods are coming at a lower rate thus providing an undue advantage for imported confectionery products in the retail 

market.

Perera rebuked the reasoning behind the Government’s imposition of the special commodity levy. “Earlier the Government’s reasoning was to impose this cess to protect the coconut oil industry which we disproved. Then they said it was to protect local fat manufacturers. But local fat manufacturers are not in a position to provide the right kind of fat to the industry.” 

He added that 90% of confectionery fats were imported by the manufacturers themselves. “It is very unfair from a manufacturing point of view in implementing this cess to protect just 10% of the market.”

The LSMA says establishing its own confectionery fats producing plant is unfeasible due to the high cost and difficulty of sourcing raw materials within the country.