Govt. to reconsider new export regulations
Faced with opposition from exporters of varied sectors against the newly imposed regulations by the Central Bank to convert 25 per cent of their proceeds from dollars to rupees, authorities agreed to revise the regulations next week.
At a meeting of exporters from a number of different sectors at the Central Bank on Thursday chaired by Trade Minister Bandula Gunawardena together with State Finance Minister Nivard Cabraal and Central Bank Governor Prof. W.D. Lakshman exporters stated their difficulties in meeting with the new regulations to convert 25 per cent of their export proceeds that would be brought into the country.
State Minister Cabraal told the Business Times on Friday that they have indeed agreed on relooking at the method of implementation of the new regulation.
In this respect, the Central Bank will be having a discussion with the banks next week on the process involved in the implementation of the new regulation.
He noted that the banks will continue to have a variation on the rates of exchange but that “there cannot be a very large variation.”
JAAF Secretary General Tuli Cooray told the Business Times that during the meeting the apparel sector had indicated the concerns of the large, medium and small scale industries that will be directly impacted by this decision of the Central Bank.
The representatives of the apparel sector had clearly pointed out that the main concern was that almost all of their transactions both foreign and local except the payment of salaries were carried out in dollars.
When making purchases from local suppliers as well the apparel industry would have to make payments in dollars as the companies are all Board of Investment (BOI) establishments.
If this freedom was not available to them they would be compelled to purchase at a higher cost and also incur a higher expenditure in the purchase of dollars once they are converted to rupees.
Mr. Cooray explained that they faced the issue of receiving advance payments by buyers for orders placed with them and noted that should 25 per cent of this amount be converted to rupees then they would not be able to carry out their purchases of any raw materials to meet these orders. While the industry had insisted that there be flexibility, the authorities had at the meeting agreed the issues surrounding the regulation would be sorted out.
Moreover, they had also pointed out that the regulation was being interpreted by different banks in different ways according to their advantage.
In this respect, the apparel sector had noted that negotiation on the rate of conversion should be made available to the exporters as well, to which the authorities agreed they would consider it as well.
Rubber Manufacturers Association Director General Rohan Masakorala who was present at the meeting had also detailed the concerns of the rubber manufacturers in this respect.
They had pointed out that firstly the industries had not been consulted and in doing so it has harmed the industries as the level of exposures to the foreign exchange system are different.
While the industries were aware of the need for this requirement by the Central Bank, however, it was noted that “just bringing regulations has caused banks to act differently with different interpretations.”
Mr. Masakorala had pointed out that the issue was not in the cashing in of 25 per cent of the export proceeds but in the methodology that was “confusing”.
Mr. Masakorala explained to the Business Times that there were a number of instances when rubber manufacturers faced issues under this new regulation.
For instance, when some of the exporters make foreign currency borrowings then 25 per cent of the proceeds are immediately converted resulting in issues for the borrower that is now unable to make a complete transaction as a sizeable portion of this amount has been converted to rupees. Converting it back to dollars is a higher expense and they will be unable to make payments on any loans obtained in their entirety either.
Moreover, some of the members in the rubber association had also been already affected by the new regulation that was completely implemented by Wednesday and Thursday. Members had pointed out that this matter should be brought to the notice of the Central Bank and that banks had requested for a number of documents to relate this funds to the 25 per cent requirement.
Moreover, banks will be the monitoring authority so exporters will not have any negotiating powers when it is converted to rupees and no negotiation is offered in converting the dollars to rupees and they will have to comply with the individual bank rates.
Tea Traders Association Chairman Jayantha Karunaratne pointed out that the problem they faced was bringing in money within 100 days as most of the tea markets are affected due to the pandemic and supermarkets do not work full time.
In this respect there could be delays in the collection of cash and supermarkets could take upto 75-90 days, he said.
Moreover, transshipment issues and irregular shipping has caused delays in their stocks reaching the destinations; this is evident in shipments sent via land from China to CIS countries that usually takes about 40 days is today taking about 90 days due to clearing issues, he said.