Packaging sector indirect focus of 2011 Budget

Analysing the budget from a different angle at the conference organised by the Sri Lanka Institute of Packaging, corporate personality and business economist Rohantha Athukorala opined that since one of the key focuses of this year’s Budget was on value addition, this can be only done through branding and eye-catching packaging, whereby the country will turn to the leadership of the Sri Lanka Institute of Packaging to provide the leadership required to support the private sector.

The speaker took an industry in point to explain the logic for the argument. The cited industry was Sri Lanka’s tea sector so that a clear detail action plan could be formulated post the conference.

He stated that the CESS of Rs. 10 that was recommended in the 2011 Budget on bulk export of tea was a proposal that was not timely given the market conditions a typical exporter of tea is up against globally. However, Athukorala emphasised that the opportunity that the packaging sector could target was very attractive and must be done in a focused manner.

To give a better direction, the speaker took a specific case in point, like the Russian market which is the number one export market in the world for tea. He noted that the policymakers of Russia had levied a import duty of 30-40% on packeted tea imported, which had resulted in volumes of tea exported that were at 18,377 MT in 2000 declining to 7,516 MT in 2009.

On the other hand, the reduction on import taxes of bulk tea at that end had resulted in the volumes of bulk tea out of Sri Lanka increasing from 21,166 MT recorded in 2000 to 28,743 MT in 2009. However, with the introduction of the CESS that has been proposed in the 2011 Budget, a typical exporter of tea will be dealt a double blow, said Athukorala.

However, he added that from a more strategic perspective, it was the right thing to do since it compels exporters to add value and thereby increase the revenue generated to Sri Lanka.

From a more positive perspective, it presents a huge opportunity for the packaging industry, which can work closely with bulk exporters of tea and thereby drive value addition, given the multi-institution thrust at different ends.

Athukorala cited the Geographic Indicator (GI) registration of Ceylon Tea that has been initiated by the Ministry of Industry and Commerce and the US$ 10 million promotional support that has been gazetted for communication activity by the Sri Lanka Tea Board, noting that the stage was set for value addition activity and driving brand marketing globally.

“This is the big time opportunity that the packaging industry must exploit,” he asserted.

On a separate note, the Budget 2011 proposals contain a 200% deduction on R&D, depreciation of new machinery at 33% and reduced duties in purchasing modern machinery, amongst other features, which make the Budget packaging industry development-centric in an indirect manner, noted the speaker. “What is now required is ground based implementation,” he pointed out.

There are around 50 corrugated carton manufacturers, 120 inner box board manufacturers, 20 flexible packaging industries and 20 paper and bag manufacturers in operation in the country.

In conclusion, Athukorala commended the proactive action of the President of the Sri Lanka Institute of Packaging A.R. Ratnarajah for championing the conference timing just after the budget as packaging and branding would be the key focus in the new development agenda of business post the Budget.