An exporter says authorities do a lot of theorising, rarely listening to industrialists and preaching to the private sector about the need to improve productivity while not practicing what they preach.

"Industries are important because they create jobs, more than the public sector does, and authorities do not listen to industrialists. They do a lot of theorising but they never listen to the practical issues we have to face," Sunil Wijesinha, Chairman/Managing Director of Dankotuwa Porcelain, a public listed company manufacturing and exporting ceramic products, told a recent public forum.

"They tell us to increase our productivity without depending on exchange rates. Things are becoming increasingly difficult because we (the private sector) have already improved our productivity. Just look at how government institutions are run. They very people who are pontificating to us should look at themselves," Wijesinha said.

Dankotuwa Porcelain PLC exports to the European Union and Wijesinha argued against the Central Bank’s recent analysis that a loss of GSP Plus trade concessions would not have an adverse impact on exports to the EU.

The Central Bank’s argument revolves around the recent depreciation of the rupee against the Euro.

"In January 2009, a Euro 10 export price brought in Rs. 1,469.3 at a Euro/Rupee exchange rate of 146.93," the Central Bank argues, "If GSP Plus is withdrawn, the export price would decline by 7 percent (because the buyer would still want to pay Euro 10) and exporters would therefore earn Euro 9.34."

"The Euro has appreciated by 18.5 percent since last January and the Euro/Rupee exchange rate is now 172.09. So when converted to rupees, an exporter would earn Rs. 1,607.31 (9.34 x 172.09) which is higher than what he would have received in January despite losing GSP Plus."

The Central Bank has posted its views on its website and has called on exporters to improve productivity levels in order to better manage a possible withdrawal of GSP Plus.

Wijesinha said the Central Bank’s argument was only half the story.

"I telephoned an Assistant Governor of the Central Bank and challenged him that the Central Bank was telling half the story.

"The rupee/euro rate was 170 some time ago and suddenly fell to 140. This created cash flow problems and we could not pay our agents their commissions. Now that the rupee has again depreciated against the euro, to Rs. 170 levels, we are not benefitting because we have to pay these commissions which have been accumulating.

"Also, in 2004, the sterling pound stood at around Rs. 200, it dropped to Rs. 160 and now it trades at about Rs. 180 levels. So we are earning less than we did five years ago," Wijesinha.

Production costs are always rising. Electricity costs and an unsustainable cost of living index which is factored into wages are constantly putting pressure on and squeezing margins.

Earlier this week, Chairman of the Apparel Exporters’ Association Kumar Mirchandani, said Central Bank’s exchange rate argument made little sense to the export sector as most if not all contracts are executed in dollars, not euros, and the dollar is under pressure to depreciate against the rupee, making matters worse for exporters. (See Island Financial Review, Monday November 23, ‘Garment industry hopes for win-win situation).

Wijesinha said since the government was using public tax money, the private sector would naturally like to see the monies put to better use.

"I was told by an industrialist making sweets, that for a one rupee sweet 33.33 cents is taxed."

Getting loans from state-owned banks was another issue. "The government says credit creation should increase, but when you apply for a loan from a government institution it takes more than three months for the applications to be processed."

"Corruption is another big problem," Wijesinha said.