Sri Lanka will be promoting vehicle assembly industry while encouraging international brand companies to set up joint ventures towards this end, State Minister for Finance Ajith Nivard Cabraal said.
Government will soon implement a plan where some vehicle assembly plants is certainly on the cards he said that ‘COVID or no COVID’, present authorities would like to see that happening and encourage companies to look at that positively and to see whether they can develop that as another industry in Sri Lanka.
At the same time with regard to the importation, the government has recognised that not everything can be done in Sri Lanka.
People need to have good vehicles, but at the same time, the county needs to have the resources to do that, he pointed out
Currently the country is experiencing a resource constrain, particularly foreign exchange, because it is essential to conserve some of those for loan repayments as well, he added.
So, in that context there would be this element of difficulty that motor traders are undergoing, but, again it is not going to be a permanent feature, he said adding hat the moment government in a position to lift that we would lift that, but then we have to look at the priorities that the country is now facing.
Commenting on allegations of new vehicles “spare parts being imported and assembled in Sri Lanka that is sold for cheaper prices,, Minsster Cabraal said the Government has stopped operation that was dismantling or cutting apart old cars overseas and putting them back together in Sri Lanka.
In a broad sense when looking at assembly, a few factors need to be considered, including the cost of the imported kit of parts, the value of parts that can be locally produced as well as the tax revenue, motor traders said.
If there is a substantial local value addition and hence foreign currency saving, it may justify the lower taxation,they claimed.
However, if there is no significant local value addition, there will be a similar foreign currency outflow to assemble a car locally as to import it fully built, but the Government will lose a substantial amount of revenue by way of tax concessions.
Vehicle assembly requires both an ecosystem of component manufacturers, as well as a market that is able to absorb the higher volumes that are required to make investments into assembly feasible.
It is certainly not feasible for all brands that are currently being imported to switch to local assembly, they pointed out.
(LIN)