Sri Lanka wakes up to massive APTA, China sunrise

As Sri Lanka’s exports under APTA grew more than three-fold by 2011’s end, the country is suddenly realising the importance of the promising sunrise FMCG segment in the 2.5 billion strong APTA markets led by APTA’s market giant, China. And in the aftermath of Pure Ceylon Tea international brand initiative, Sri Lanka is now beginning to push Pure Ceylon Cinnamon and other exports to China using a rare opening given on 24 September by Chinese admin to its vast FMCG market, based on a Lankan Ministerial level request.

“On behalf of our exporters, I thank China’s SAIC for giving us new openings. In the period of 2007-2011, our exports to APTA bloc grew by huge 360% to an estimated $99 million. This outsize growth rate is highly promising. And in 2007-2011, Lanka’s exports to China under APTA alone grew by massive 700%,” said Minister of Industry and Commerce Rishad Bathiudeen.

Minister Bathiudeen announced this in the aftermath of a high level official courtesy call made on him by Gan Lin, a Vice Minister of the powerful State registration and licensing authority of China, called as the State Administration for Industry and Commerce of China (SAIC). Lin’s SAIC has more than 51 million business enterprises and individual businesses as well as 436,800 foreign firms registered under it and operating within China. SIAC is run by Minister Zhou Bohua, the direct appointee of Chinese Premier Wen Jiabao. Among SAIC’s well-known functions are handling of international trademarks in China.

If Sri Lanka’s latest initiatives on the China market become successful, Sri Lanka will be able to effectively draw on China’s promising Fast moving Consumer Goods (FMCG) segment, which is widely regarded as a sunrise industry. According to the global market research giant Kantar Worldpanel, China’s sunrise “urban sector FMCG market” alone grew by 16.4% in Q1-2012 in comparison to Q1-2011. The hypermarkets, supermarkets and convenience stores (collectively called as ‘modern trade’) are still the most important trade in China, taking 40% of the value share in China’s FMCG market.

Interestingly, both urban and rural households also reported income growth in 2012 and the income per household was higher than the inflation rate. Rural income growth stood at 17% (compared with Q1-2011), while urban incomes rose by 13.8%.

The APTA bloc members are China, India, South Korea, Sri Lanka, Bangladesh, and Laos. In 2010, Sri Lanka’s total exports to APTA bloc (Bangladesh, China, India, Laos, and South Korea) stood at $64.5 million which topped to $99Mn in 2011, according to the latest estimates provided by the Department of Commerce of Sri Lanka.

“It is significant that under APTA, Sri Lanka receives export tariff concessions for 4795 export items from APTA bloc of which, 1858 product items are from China –the highest tariff concession giving country under APTA,” Minister Bathiudeen informed Lin (South Korea closely follows with 1673 items, and India, 1055).  “In 2007-2011, Lanka’s exports to China under APTA grew by 719%, thereby China becoming the most promising destination when it comes to Sri Lanka-APTA trade,” Minister Bathiudeen revealed. “We thank you for facilitating more and more Sri Lankan products to the Chinese market. As we move further into APTA, our situation will be improved greatly by a level playing field.

Therefore, as a start, we need support from SAIC for a level playing field for our products in China’s market,” Minister Bathiudeen added.

Introducing Ceylon Cinnamon to Gan Lin, Minister Bathiudeen said: “We are also very keen to increase reception to Pure Ceylon Cinnamon in China’s market in the same way as Pure Ceylon Tea. Sri Lanka will be thankful for marketing and distribution support for our Cinnamon and other exports. We are looking to get Pure Ceylon Cinnamon trade mark in China and to this end, we need SAIC’s assistance,” Minister Bathiudeen requested.

“We like your products which are of high quality and we are looking for more and more tea and rubber from Sri Lanka” said Lin apprising Minister Bathiudeen. “We at SAIC are focused on market development of our own Chinese products rather than foreign products. However, we see Sri Lanka as a small exporter and from our point of view Sri Lanka’s volumes is no threat to China market at all. Therefore we are looking at your official, Ministerial request favourably and would consider assisting Sri Lanka in China markets,” announced Lin.

“Also my suggestion in this regard is that there is great potential for each other and joint efforts from both parties can successfully exploit this promise. We also invite Sri Lankan businesses to visit China more often and explore Chinese consumer needs closely so that Sri Lankan suppliers can get a better idea as to what they can move and what they cannot in the Chinese marketplace,” Lin stressed. Though Sri Lanka’s exports to Bangladesh under APTA also grew massively from 2007-2011, it is due to trading of a single product, namely copra. However exports to China under APTA, are a much more diversified basket, and holds bigger potential. The third round of APTA talks in 2006 resulted in successful tariff concessions which were substantial under APTA (entered into force September 2006) and offered a maximum of 50% Margin of Preference on existing tariffs among the member countries, includes substantial tariff concessions and a wider coverage of products. The Department of Commerce revealed that at the end of the third round, the APTA bloc had exchanged concessions on 4,270 products plus 587 products offered exclusively to Least Developed Countries (LDC), a marked increase from the 1,721 products plus 112 products prior to September 2006.

Among Sri Lanka’s major exports to APTA are spices (pepper, nutmeg, mace) cashew, essential oils, natural graphite, activate carbon, rubber products (tyres, gloves, mats, rings) floor tiles, ceramic, tableware/kitchenware, glassware, semi-precious stones, gem and jewellery, stuffed toys, brooms and brushes, cut flowers, footwear, biscuits, chocolates, apparel, fresh fruits and juices, wooden furniture, mattress, electric lamps, ornamental fish, fresh/frozen fish and fishery products.