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Tuesday November 29th, 2022

Sri Lanka hotels, software firms with German partners to face human rights law

CONSUMER CONCERNS: German consumers are increasingly concerned over human rights forcing retailers, brands and the government to take action.

ECONOMYNEXT – Sri Lanka’s exporters of including software and hotels who provide services to companies in Germany as well as food exporters and manufacturing companies will face human rights rules under a supply chain law which will come into effect in January 2023, officials said.

“The law does not distinguish between types of companies,” Torsten Safarik, President of the Federal Office for Economic Affairs and Export Control (BAFA) which will enforce the German Supply Chain Due Diligence Act (SCDDA) said.

“Tourism companies and all companies will have to comply.”

BAFA is now setting up a separate office which will be staffed with over 140 officers to enforce the law.

Related Link: Guidelines for Risk Analysis (In German)

Related Link: English BAFA website

German companies with over 3,000 employees will come under the law first. The threshold will be lowered later.

Companies in Germany will be required to ensure that their suppliers and partners in Sri Lanka comply with human rights, labour laws and environment or face penalties.

Some Sri Lanka manufactured exporters, which have links with global and German brands already comply with some of the principles enshrined in the law.

However many more are not aware of the potential impact of the law.

“We have many members who are exporting to Germany,” Shiham Marikar Chief Executive of Sri Lanka’s National Chamber of Exporters said.

“But they do not know anything about it. We have to get the exporters prepared. Our next step is to get the exporters do a survey and engage with the organization in Germany to get them prepared.

“As a Chamber we are also looking at giving a certificate to companies that comply with the law.”

Former Commissioner of Human Rights of the German government now Managing Director Löning Responsible Business and Human Rights said German companies will start conducting risk assessments on suppliers to check compliance.

Each company will have to audit and have knowledge of their supply chain.


Sri Lanka to face human rights rules on exports to Germany from Jan 23

German importers and business partners may be forced to drop companies in Sri Lanka that do not treat workers well or do not take precautions to minimize their impact on the environment.

However it is also an opportunity for companies that comply to maintain or expand their business, Löning said.

One of the triggers for the law was the collapse of Rana Plaza in Bangladesh which left over 1,000 people dead and consumers started asking question from apparel brands in particular.

After the disaster many global brands started their own standard which required supplies to audit and show compliance.

“Each company that conforms to OECD guiding principles will be well prepared for the supply chain,” Safarik said.

Tim Richter from the Helpdesk on Business & Human Rights, Agency for Business & Economic Development (support service of the Federal Government) which is advising German companies said more than 2,000 companies have consulted them on the upcoming law.

In Sri Lanka apparel companies and also some food exporters, who already comply with their brand partners’ standards had already made progress, but companies that do not comply may face termination of their business relationships with German buyers.

An European Union wide law is also being drawn up, which will come into effect later. (Colombo/Aug25/2022)

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Sri Lanka rubber farmers to get boost from France, Michellin

ECONOMYNEXT – Sri Lanka will start a project supported by France and Michellin group to support 6,000 rubber farmers, cabinet spokesman Minister Bandula Gunawardena said.

Rubber farmers in Badalgama and Medagama in the Moneragala district will be supported improve their capacity and supply chains at a cost of 726,700 Euros.

Financial support will be provided by France’s Michellin group which has a subsidiary in Sri Lanka and the government of France.

The project will be implemented by France’s Ksapa group under the guidance of Ministry of Industries.

The cabinet of ministers had cleared a proposal by the Plantations Industries Minister to enter into an agreement to implement the project. (Colombo/Nov29/2022)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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