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Effect of export cess on exports of coconut products from Sri Lanka: A multi-market model simulation

Author: 
Ponniah SIVARAJAH
Subject Area: 
Social Sciences and Humanities
Abstract: 

Coconut products exports have been a traditional foreign exchange earner for Sri Lanka from the agricultural sector. The specific objective of the study was to analyze effect of export ‘cess’ rates on coconut products from Sri Lanka. Secondary data (1960-2010) on the production and exports of coconut products was used in the analysis. The analysis of the effect of export “CESS” changes on commodity supply and input demand by processing industries showed that all the simulations had no significant impact on the supply of all the coconut products exported, and also on the demand for fresh nuts by the processors. The results also indicated that export “CESS” changes, even in the case of complete removal, had no significant effect on the export demand for coconut products. The impact of simulations on the consumption demand for all the coconut products showed no significant changes, ranging from very low values to 0.39 per cent for desiccated coconut. The effect of export “CESS” changes on incomes of producers, processors, exporting firms and government analyzed through simulations indicated that 30 per cent, 50 per cent and 100 per cent reduction in export “CESS” rates caused positive growth rates in the industry income, coconut products suppliers’ income, exporting firms’ income, whereas there was a loss to government tax revenue. The imposing of an export ‘cess’ on coconut products has various implications to all stakeholders. But it is essential to look into the development of the coconut industry in the long-run which urgently needs heavy investment either by the government or the private sector participants. Sri Lanka’s coconut products exports have to be competitive on one side, as well as the industry needs investment to modernize production and increase exports. Complete removal of export ‘CESS’ rates have an impetus for the private sector to invest in the industry development to be competitive globally.

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