No boxes for exports

Dollar crisis slows down packaging industry

The dollar crunch has placed Sri Lanka’s packaging industries in a crisis that also affects the forex-earning export sector.

Industry sources said the country could face a shortage of flexible wrapping materials and corrugated cartons used in the packaging of merchandise for export market.

The 29- member Association of Laminated Flexible Packaging Manufacturers said several of its companies had scaled down their productions because of a shortage of raw material.

The association’s president, Anton Hemantha, said companies usually maintained stocks of raw material up to three months but they had exhausted their stocks and were finding it difficult to replenish them due to the dollar issue.

He said that for months, commercial banks had not been releasing the required amount of dollars to open letters of credit, making it impossible to negotiate prices with suppliers.

The volatility in the world market is pushing prices up with suppliers demanding higher prices for the same raw material ordered, because of delay in opening LCs.

Mr. Hemantha said the situation could lead to a severe shortage of packing material thereby severely affecting the country’s export sector.

Merchandise exports was a high export earner in 2021, bringing in a record US$ 1 billion for three consecutive months starting August 2021, thereby bolstering the Gross Official Reserve (GOR) of the Central Bank.

The export income from the sector saw an increase of US$ 7,903 million (22.6 %) from January to August 2021 compared to the US$ 6,445 million earned during the same period in 2020.

The only alternative available for exporting companies is to import the product but this too was not possible because commercial banks have no dollars.

The flexible packaging industry largely caters to sectors dealing in

Sri Lanka’s key exports such as tea and garments. It also caters to exporters dealing in fish, gem and jewellery, rubber products, biscuits, desiccated coconut, agricultural products and textile.

Corrugated cartons manufacturers also claimed that they did not have sufficient raw material to continue production.

The Lanka Corrugated Cartons Manufacturers Association which has 14 manufacturing firms in its membership said its members were struggling to supply the regular quota to their customers.

Corrugated cartons are used in the packing of garments, fish, fruits, agricultural and rubberised products.

The industry imports 90% of its raw material which is mainly used or waste paper.

“The country's exports are in jeopardy. The Government should take swift action to prioritise the industries dealing with the export sector to keep the dollars flowing in,” an industry source said.