ECONOMYNEXT- Alumex Plc, which has commissioned Sri Lanka’s largest aluminium extrusion plant says it is eyeing exports and plans to compete strongly in a domestic market with import tax protection that forced customers to pay high prices to be phased out in the future.
With the opening of a two billion rupee plant with the most modern technology and an output of 1,200 metric tonnes a month, Alumex is trying to reduce prices and meet global competition.
“We’re trying to match the prices of the United Arab Emirates," Managing Director Pramuk Dediwela said.
"If we can match those prices, we don’t have to worry about imports coming from any part of the world."
He said that aluminium products in the UAE have high standards at low cost.
The Sri Lankan government has announced plans to remove all protectionist tariffs by 2020 to make the economy competitive.
The aluminium sector has 30 percent import tariffs.
“It is a protected industry,” Dediwela said.
He said that with the addition of Alumex’s new plant, local supply capacity is three times the current local demand of 15,000 metric tonnes per annum.
Dediwela said that with the opportunities the port city project and the general construction boom is presenting, all local manufacturers have expanded capacity.
Alumex alone has a 24,000 metric tonne annual capacity, he said.
“With this plant, the country doesn’t need to import any aluminium extrusions," he said.
"When total local capacity is three times the demand, it’s a national crime to import," he said."It will cost us in foreign exchange."
Economists and philosophers have explained that imports are not a crime, and the right to buy a good from any producer regardless of the geographical location at the best price is a freedom all citizens inherently have in a true free country and stealing somebody’s freedoms to force them to pay more of their hard-earned money causes harm, especially to the weakest members of a society.
Members of a society should act freely but in ways that does not cause harm to others by taking away their freedoms, which can be economic freedoms, the right to life or property.
Most building material in Sri Lanka have high costs due to protectionist tariffs, giving easy profits to a handful of businessmen as well as promoting inefficiency at the cost of ordinary families who are trying to put a roof over their heads.
Sri Lanka’s export industries and hotels are also having high start-up costs due to protection given to building materials, pushing up costs and making it difficult to compete with countries, especially in East Asia, which have free trade.
In addition to lowering the overall competitiveness of an economy, businessmen who build protected industries also use up capital and resources in activities which exploit the people and generally lowers the well-being, reducing resources available for non-exploitative businesses.
Alumex has a 46 percent share in the aluminium extrusions market and related party Swisstek Aluminium Ltd has a 30 percent share, Dediwela said.
Lanka Aluminium Industries Plc, owned by a third party, has a 19 percent market share and the remaining 5 percent is from imports, he said.
Alumex is aiming for a 50 percent market share, he said.
Dediwela said that more importers are already eyeing entry due to the potential in Sri Lanka.
The current local excess capacity will be filled in another 5 years with the expected construction, he said.
In the interim, Alumex is looking at exports to utilize the plant capacity, and will set up two showrooms in India, one in the Maldives, one in Nepal and one in the Seychelles to improve distribution networks, he said.
Currently, exports to these markets are less than 2 percent of revenue and Alumex is targeting 10 percent, he said. Alumex may also enter the UAE, he said.
If demand picks up in these regional markets, Alumex will look at a possibility of building a plant in South Asia, he said.
“We have big expansion plans at the moment but we haven’t finalised which country to build it in.”
“The technology we have in Sri Lanka is more advanced than technology available in other countries, whether it’s India, Bangladesh, Pakistan or Nepal. So, we want to share that.”
High labour and energy costs in Sri Lanka are affecting the decision as well, he said.
“Costs are not that high in Bangladesh. Even India.”
India has four or five plants which are as big as the new Alumex plant, he said. However, the Alumex plant has fully automated extrusion, which is currently unavailable elsewhere in South Asia, he said.
Eco-friendly processes and low wastage are also features of the new plant, he said.
Another local plant is also in the cards 5 years from now if capacities become full, Dediwela said. (COLOMBO, 15 August, 2018)