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Consumer durable imports slow in 2012 - CCC Study

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The Ceylon Chamber of Commerce statistical analysis on consumer electronics and domestic appliances imports into Sri Lanka finds that imports have recorded robust growth in 2010 and 2011. According to the study in 2011, there had been a remarkable increase in imports both in terms of quantity and value in almost all categories of electronic items. The overvalued exchange rate coupled with low interest rates and reduction in taxes applied contributed to this growth in 2011. The growth is more moderate in 2012 compared to 2011, with a number of consumer electronic products recording a decline in imports both in value and quantity. This is due to the sharp fall in the rupee, ceiling on credit and increased cost of borrowing.

As a result of rapidly changing technology and shift of production to low cost production destinations like China and India, the price of consumer electronic items has declined significantly over the years. This has made electronic items affordable to middle and low income earners in developing countries like Sri Lanka. In addition to that increasing income levels of the people and changing lifestyles has also increased demand for consumer electronics and home appliances.

Customs statistics on consumer electronics and home appliances imported fall under both HS Chapter 84 on machinery and mechanical appliances as well as HS Chapter 85 on electrical machinery and equipment. The value of imports of HS Chapter 84 recorded a growth of 66% in 2011 and 19% in 2012. Imports under Chapter 84 cover a large variety of machinery and parts which are classified as investment goods in addition to consumer electronics and domestic appliances. Hence the growth in imports in this category reflects increasing demand for investment goods as well as demand for durable consumer electronics. The expenditure on importation of electronic machinery and equipment (HS Chapter 85) increased by 57% in 2011 and by 18% in 2012. As a % of total imports, Chapter 84 accounted for 8.2% and Chapter 85 accounted for 6% in 2012.

The study finds that the market share of China as a % of total imports have increased steadily over the years. In 2012 the market share of China increased to 34% from 25% in 2011. India is the second largest supplier accounting for 11% of total imports in 2012. Countries like Japan and Singapore, which used to be leading suppliers of these products have been steadily losing their market in Sri Lanka.

The decline in consumer electronic items imported in 2012 had been modest compared to the high rate of growth experienced during 2010 and 2011. Therefore the volume imported of most items in 2012 remains well above the annual average volume of imports during 2005-2009. For example the number of household type refrigerators imported (HS 84.18.21) increased by 267% in 2011 to reach 167,844 units. In 2012 although quantity imported declined by 26%, the volume of imports of 119,923 units is well above the average of less than 50,000 units per year imported during 2005-2009.

While most products analyzed in the report recorded a decline in imports in 2012, few products recorded an increase. These are air conditioning machines (HS 84.15.81, 84.15.82 and 84.15.83), televisions (HS and mobile phones (HS 85.17.12).
Mobile phones (HS 85.17.12) imported increased by 282% to reach 3.4 million units in 2011 up from 0.8 million units imported in 2010. In 2012 the number imported increased further to reach 3.5 million units. Sri Lanka is a country with high telephone density. According to Central Bank statistics in 2011 telephone density was 100.5 connections per 100 persons, indicating that the number of connections exceed the number of people living in the country.

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