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Sri Lanka canned fish makers demand pound of flesh: report

Oct 29, 2017 09:05 AM GMT+0530 | 3 Comment(s)

ECONOMYNEXT - Sri Lanka's rent-seeking canned fish manufacturers have asked the government to raise import duties in a bid to gouge poorer customers more easily with higher prices, according to a media report.

"We urge the government to re-impose the import duty on canned fish to its original level and protect the local industry," President Canned Fish Manufacturing Association of Sri Lanka, Shiran Fernando, was quoted as saying in Sri Lanka's the Sunday Observer newspaper.

"We cannot compete with the large importers following the huge reduction in duty."

Sri Lanka still has an import duty of 50 rupees on canned fish, the newspaper said, down from 102 rupees before 2015.

Sri Lanka's “import substituting” canned fish manufacturers, most of whom who came into being during the last decade are the latest rent-seeking businesses that are exploiting the poorest consumers by hiding behind import duty protection.

Canned fish is a key ingredient of “wadi buth,” the rice meal popular at construction sites.

But when import duties were raised ensuring huge profits to the few local canning factory owners, construction workers had to depend on dry fish and sprats, householders recall.

Tinned fish is also a cheap protein for the poorest families, especially among those who do not have a refrigerator at home to store fish.

Domestic producers who hide behind import duties to charge higher than world market prices have proliferated in the building materials sector too in addition to essential food.

Both hunger and shelter are easy targets for profiteers seeing to make money by avoiding competition. They point to foreign exchange outflows as a reason to reduce imports and force people to pay higher prices to buy what is produced locally.

The report said Sri Lanka spent 12 billion rupees on imported canned fish in 2015 and 10 billion in 2016. In 2017 6.3 billion rupees had been spent on importing 27,396 metric tonnes of fish, the report said.

Sri Lanka ran into foreign exchange shortage after a money printing central bank was created in 1951, allowing the newly independent state to easily deficit spend, removing a 'hard budget constraint' in the form of a currency board.

The balance of payments problems coming from the central bank's so-called 'soft-peg' led to progressively draconian exchange and trade controls, as well as high inflation and currency depreciation.

It led to a revival of Mercantilism, with trade, rather than money, credit and low interest rates being blamed for currency troubles.

It also gives an excuse for rent-seeking 'import substitution' businesses to exploit the poor under the guise of 'saving foreign exchange'.

Some analysts say that in order to make any trade reform stick, the government will have to reform the central bank to reduce its ability to keep interest rates down by printing money. (Colombo/Oct29/2017)


 

3 Comments

  1. sacre blieu October 30, 06:50 AM

    This fishy businesses smells awful. If we export our fish and import canned fish at an even lower price, how come. The protection given seems to be adequate and there may be some other issues. Our coast guard should observe if fish are traded mid sea and continues unreported. Poaching seems still prevalent.

  2. Sriyan October 30, 06:10 AM

    The reason people buy canned fish is because it is cheap and also has a different taste. Import substitution under protective tariffs means exploitation of the weak.Sri Lanka already exports high value fish. Sef-sufficiency is not economics it is politics.
    These factories are inefficient, that is why they prey on the consumers. It may be that due to Sri Lanka's small size raw fish distribution is more efficient and small fish like mackeral has a ready market and a high enough price to safisfy fishermen, and make canning unviable.

  3. Jason October 30, 05:14 AM

    I have a degree in economics and financial management. Yes in Sri Lanka many manufactures tend to profit themselves. However i will have to disagree in this case, my reason being, The fishing industry. In order for a country like Sri Lanka to be self sufficient in the canned fish sector - they need to produce more canned fish.
    At the present, they cannot due so, due to the high demand of imported fish from China and Thailand (where fish in those countries have less nutrients). By having local manufacturers employ more citizens and buying more of our countries fish - Sri Lanka will be sufficient.
    There is a bigger picture to be seen and so i believe that increasing the import duty on canned fish and helping the local canned manufacturers at this crucial time is a necessity. If not imported canned goods will flood Sri Lanka and destroy local manufacturers which will destroy employment and run down our economy, especially when a country like Sri Lanka which is surrounded by the Ocean, and can do so much in regard to the Fisheries Sector.

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