Getting ready for Rio+20… industry-led

SL: Cleanest country in South Asia

As we celebrate World Environment Day today, it is important to acknowledge that the Sri Lankan economy has experienced accelerated growth from a 20 billion dollar economy in the 1990s to be a 59 billion rupee economy as at end 2011.

However a point to note is that whilst this strong economic performance existed in the last 30 years, our geographic landscape has yet been maintained with its pristine and natural beauty that many of our neighbours like India or Pakistan could not preserve.

If I were to be more exacting, in the recently published UN report on climate change Sri Lanka registers an Mt C02 emission of 11.5 whilst China gallops at 5007.1, India records a 1342.1 and Pakistan 125.6. South Asia in total is at 7.0.

Some can argue that this is the ramification of a 30-year war but in my perspective this is the reality and we must be glad that that Sri Lanka has remained green and we must now maintain this whilst sprucing up the economy. Let’s not make Sri Lanka another concrete jungle of South Asia.

If one takes a marketing perspective we can go on to position Sri Lanka as a ‘Clean Country’ and thereby differentiate the country globally so that we give a reason for a traveller to come to our little island.

This positioning is stronger given that it is not what an image that we are trying to construct, rather it’s something that is emerging bottom up. To be specific, the four billion dollar apparel industry has earned an industry positioning globally as the first ethical sourcing destination and the tea industry being given the status of the first ozone friendly tea nation of the world which are all on this theme of cleanliness and less pollution.

The challenge is if we get together and recognise this emerging new positioning that has happened due to an industry led strategy than a nation branding initiative and make sure that we drive industry strategy with this positioning in mind.

SL: Key industry strategies

In this background, let me give you a brief overview of the current strategies that are in play in the Industry and commerce sector of Sri Lanka as per the latest 10 man committee report.

1) Tea industry

The objective is to increase value addition tea exports by identifying new markets while promoting Ceylon Tea and thereby achieve the following:

• Increase export volume of value added tea to specialised markets identified by the Sri Lanka Tea Board
• Launch the aggressive Ceylon Tea campaign as the guarantee as the most environmentally friendly, and highest quality tea in the world
• GI registration of Ceylon Tea, seven regional tea names and ozone friendly Ceylon Tea and carve out a niche internationally
• Enhance value of Ceylon Tea

2) Packaging industry

The objective is to enhance the quality of packaging – especially export products in order to capture the international market and thereby achieve the following:

• Increase the quality standards, consumer acceptance and the demand for the local packing whilst driving for 50% import substitution
• Develop packaging materials using locally available raw materials
• Develop cognitive skills of technical grade employees of packaging industries
• Setting up of a fully-fledged packaging development centre

3) Spice industry

The objective is to establish a centralised cinnamon processing centre and thereby achieve the following:

nIncrease the value addition of cinnamon from current value adding portion of 1% out of total production/1.5-2.0% out of total exports, up to 5% of total production and 10% of total exports

• Establishment of 10 centralised cinnamon processing centres in Galle and Matara Districts
• Uplifting of value added cinnamon production
• Double the production of cinnamon through mechanisation and peeling twice a year
• Capture of higher market share from top spice markets viz. Europe with HACCP and ISO standards

4) Food products and beverages industry

The objective is to increase the improve the quality of processed food made in Sri Lanka to increase the volume of processed food export and supply safe and high quality for the domestic market created by booming tourism industry and there by achieve the following:

• Drive 20 food processing industries to obtain internationally recognised food safety and hygiene certificates (ISO 22000, HACCP, GMP) each year over the period of five years
• Supply the total demand of skilled technical grade employment in food processing industries by 2015
• Establish training facility and technology transfer centres at universities (those who offers food technology degrees)

5) Die and mould industry

The objective is to develop a local die and mould industry to serve all other industry needs and there by achieve the following:

• Increase of market share of die and mould from 20% to 45% end of 2015
• Strengthen the die and mould facilitation centre and establish research unit within the centre
• Strengthen the university – industry and government linkages

6) Wood and wood products industry

The objective is to develop and strengthen the wood based industry in Sri Lanka and there by achieve the following:

• Removing barriers heavily affected to the industry and
• Improvement of technology transfer

7) Boat building industry

The objective is to develop competitive boat building and ship repairing industry in Sri Lanka, to international standards and there by achieve the following:

• Set up dedicated industrial park for boat building and ship repairing industry in Trincomalee
• Development areas – marina, boat building park, launching bay, ship repairs, dry dock up to 150 tons, floating dock approximately 500 MT

8) Rubber products industry

The objective is to improve current competitiveness status of Sri Lanka rubber based manufacturing industry and to capture 2% share of the global market for rubber products and there by achieve the following:

• Improve the quality of rubber products manufactured
• Develop a high quality, productive and committed workforce for the rubber sector
• Benchmark and adopt global quality standards and best manufacturing practices

9) Pharmaceuticals industry

The objective is to increase the market share by 15% of the local pharmaceutical manufactures to 25% in five years and thereby achieve the following:

• Increase the rupee value of the local manufactures market share from Rs. 4 billion to Rs. 18 billion
• Obtain a larger share of DHS tenders and encourage local manufactures to increase private sector market share
• Accelerate depreciation for investment in the pharmaceutical industry as extend to the IT industry earlier.
• Training of personnel/improvement of technology and information and expand services of the independent analytical laboratory segment.

10) Leather products industry

The objective is to build up image as a producer and supply of quality leather and there by achieve the following:

• To supply the total requirement of finished leather to the leather footwear and miscellaneous leather goods industries
• Capacity building
• To increase direct and indirect exports from US$ 3.28 million in 2009 to US$ 25 million by 2015
• To extend the duty free import facility to tanners for import of leather whilst relocating of tanneries
• Leather city development programme

11) Electrical and electronics products industry

The objective is to capture US$ 2 billion worth market share in electronic products by 2020 and there by achieve the following:

• Tax concessions to private sector precision plastic and metal component manufacturers
• Development and modernisation of education and research and development
• Establish design service providers in electronic circuit design, die and mould design, rapid prototyping and strengthen them. Contribution of rapid prototyping facilities
• Establish support industries capable of manufacturing precision plastic and metal components for the electronic industry
• Promotion and support for technology parks cooperating closely with educational and R&D centres

12) Footwear industry

The objective is to increase the export from to US$ 17m to 50 m by 2015 and thereby achieve the following:

• Upgrade the technical knowledge of work force
• Image building and recognition to the industry locally and internationally
• Market development – Position Sri Lanka in the international market as a quality footwear producer
• Establishment of leather and footwear design and development institute.
• Develop common facilities for SMEs – Setting up of the fully-fledged footwear clusters of the Districts of Gampaha, Colombo, Kurunegala, Jaffna and Kandy

13) Ceramics industry

The objective is to ensure the continuing supply of raw materials and reduce cost of production and thereby achieve the following:

• Develop a ceramic raw materials base and support industries
• Capture new markets
• Assist raw material mining industry
• Increase yield through enhanced productivity
• Improve the production processes to improve productivity and lower cost of production

SL: For sustainable development

Whilst this aggressive agenda on economic growth is in progress with a strong private-public partnership we must make sure that we are environmentally responsible. Some of the overriding strategies that can be followed to make Sri Lankan Industries sustainable are as follows:

1. Address regional disparities: Disparity of available infrastructure facilities between regions, particularly between the Western/North Western Province and the other regions has been a main reason for the concentration of industry in the western part of Sri Lanka. There are 20 industrial estates which are currently fully operational, while seven estates are in the process of being completed and a further six are proposed. In areas like Jaffna (Atchchuvely), Vavuniya and Mannar, that gives you the north east focus of the new agenda.

2. Smooth functioning of the existing industrial estates by upgrading the infrastructure facilities in the existing industrial estates.

Economic sustainability and good labour standards in industries

This is to ensure that by ensuring inclusive and broad-based industrial development, the industrial sector can contribute strongly towards poverty reduction, and enhancing living standards.

A key element of this is ensuring that industrial sector workers are given a suitable working environment and necessary rights and protections just like what the Apparel Industry has achieved globally for Sri Lanka.

It’s also important that Sri Lankan industries must greatly leverage its green and ethical credentials, positioning our manufacturing sector not just as a ‘factory floor’ to the world, but as a ‘green, clean and ethical manufacturing hub’.

Environmentally-friendly industrial development

Many developed countries are now faced with a severe challenge of environmental degradation and pollution due to their rapid industrialisation over the last century. Especially the Newly Industrialised Countries (NICs) realising the importance of ‘greening’ their industries in order to be more environmentally sustainable.

Sri Lanka which is way up on this agenda must place strong emphasis on strengthening the green credentials of her industrial base. Our industrial policies should be aligned with the global imperative on reducing per-capita emission levels and advocate obtaining certificates such as Forest Stewardship Council (FSC) certificates to ensure the forest resources are managed to meet ecological needs, as well as encouraging more industrial undertakings to obtain UNFCCC certification in order to credibly trade on the carbon credits market is my view.

SL: Next steps

Whilst we are getting ready for Rio 20+ conference, let us take this opportunity to highlight Sri Lanka’s unique positioning and plan out the strategies for the near future so that we can maintain this unique position globally as the cleanest country in South Asia.

(The author is a honorary Senior Advisor to the Ministry of Industry and Commerce of the Government of Sri Lanka and was the first Executive Director of the Government Economic Council(NCED) under the Presidential Secretariat. The thoughts are strictly his personal views and not the views of any organisation he serves currently in Sri Lanka or internationally.)