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Dilmah for trade liberalization provided there is a master plan: Malik

Oct 22, 2015 (LBO) - Sri Lanka's top tea company Dilmah supports trade liberalization provided there is a master plan in place, Malik J. Fernando, a director of Dilmah, said at a forum in Colombo. An effective plan where local corporates are consulted and given preference over foreign investors is necessary within any sector undergoing liberalization, Fernando said. "If there is full consultation with local corporates, and we agree on what is best, and people have an opportunity of positioning themselves in early mover situation, there would be no concern about opening out," he said, at the 64th LBR LBO CEO Forum on Wednesday. "Government needs to communicate better, need to say here are the policies, get input from the private sector, and then come together with an effective plan." "Typically what happens is, there is very little information, and then suddenly a certain area may be opened out, liberalized, where local companies have not been given the opportunity to jockey and position," he said referring to concerns that apply to industries such as tea, commodities or apparel.   https://youtube.com/watch?v=K3XQX4nK-tM%3Frel%3D0 According to Fernando, Sri Lanka under utilizes its tea resources which caters to around six percent of the world's purchasing requirement. Tea imports are currently restricted to around 5 to 10 percent for blending purposes due to concerns that multi-origin teas may be marketed as 'Pure Ceylon Tea' diluting the Sri Lankan brand. Analysts say blending operations, possibly through new foreign investment with local tie ups, could significantly boost value addition, foreign direct investment and demand for tea from the tea auctions. Careful surveilling and monitoring of new multi-origin blending operations, maybe in separate tea processing zones, could solve the abuse of the Ceylon Tea brand. Dilmah believes tea branding is essential to promote Pure Ceylon Tea and has a track record of capturing significant international market share with its orthodox Ceylon teas.  
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Malik J Fernando
Malik J Fernando
8 years ago

very misleading article, i was responding to a generic question on allowing foreign firms/investors to enter the Sri Lankan market as envisaged in CEPA etc – this response was not related to tea [although i bemoan the lack of a plan for tea in my response] where the question of foreign firms coming in wouldn’t anyway arise as it is only local firms seeking to reduce their cost base. There is no foreign investment connected with allowing cheap tea imports, which will only allow the *existing players* to undercut Ceylon tea. At the forum I also mentioned that 4 million Sri Lankans depend on tea and allowing cheap imports would signal their doom. I urged local brands to premium position and to sell beyond the minuscule 6% of global purchasing power market we sell in now, which is the only way a high cost premium product like Ceylon tea could be sold. It would however be a good idea if those touting cheap imports were to present a *plan* rather than present it as the holy grail.

8 years ago

Malik, thank you for the clarification. In the video you mention you are
for trade liberalization, in the general context of Sri Lanka trade
agreements, provided there is a master plan and local corporates are
consulted and that this applies to several sectors including tea. This is certainly a reasonable position to take.

In terms
of the Sri Lanka situation, if opening up leads to local price
competition which depresses tea prices, this is a negative
outcome and one we should avoid.

So the question, as suggested
by economic theory, which states that trade liberalization leads to
industry growth, is whether liberalization will support Sri Lankan
companies capture new markets, and whether foreign tie ups will help us
capture new markets.

If this can be facilitated through a master plan then your initial argument holds.

I don’t see why we can’t encourage foreign tie ups on a case by case basis. Our key sectors such as
telecoms, garments, banking, IT have all grown with foreign involvement,
even though local corporates don’t initially support this.

export to a few countries, and you agree that we must do more to capture
new markets in North America and Europe. The standard way to convert an archaic industry into a modern one is liberalization. So the question is whether we
can be clever about the way we do so.

Would love your thoughts, please comment.x