Sri Lanka’s approach to trade pacts too slow, ineffective: Governor

Published : 9:00 am  July 14, 2017 | No comments so far |  |  (63) reads | 

Difficult for public to ascertain progress of trade negotiations

SL could become only country in the world to access market of over 3 billion

Local barriers to trade should be removed for country to be competitive

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By Chandeepa Wettasinghe

The Sri Lankan government is not implementing its proposed trade plans as quickly or as effectively as it should, Central Bank Governor Dr. Indrajit Coomaraswamy said last night at the CINEC Convocation 2017.


“The critical question is whether we can execute effectively. The plans are there. In my view they’re good plans. But whether we can implement effectively? Well, it’s too early to tell. That seems to be our weakness. We’re not implementing as quickly as we should, and one can argue, we’re not implementing as effectively as we should,” he said.


It is difficult for the public to ascertain how quickly or efficiently the trade negotiations are taking place since Sri Lanka is not publishing even the summaries of the progress of trade negotiations, unlike the EU—which collects public views as a basis for negotiations, provides brief summaries of progress, and conducts public consultations—which advised Sri Lanka to follow its suit. Some ministers have suggested that the government should hire foreign expertise to negotiate these trade pacts on behalf of Sri Lanka, if the expertise is not available here.

 

According to Dr. Coomaraswamy, the government’s plans to reorient Sri Lanka towards trade based on preferential market access to India, China, Singapore and the EU will be Sri Lanka’s selling point for attracting foreign direct investments (FDIs) for export industries out of a sea of FDI destinations.

“If these trade pacts do get implemented, our market access will be our differentiation from other countries,” he said.
Dr. Coomaraswamy noted that Sri Lanka could become the only country in the world to access a market of over 3 billion, since even Singapore doesn’t have access to the EU, despite having trade deals with China and India.
“The civil society and government all have to say that we have a great opportunity. What do we need to get it done? As I said, the plans are not bad. They’re good in fact. But we have to deliver and I think it has to be a national effort to deliver, and not really trying to pull things down. We need to build things up,” he said.

Further, he said that despite resistance from various sections of society on the effects Sri Lankan industries will have when the local economy is opened up to economies with large production capacities, Sri Lanka has to open up its markets less than these countries in trade pacts to handle the asymmetries in the sizes of the economies.

However, theoretically, this asymmetry may work against Sri Lanka in the long-run, since the country may continue to invest in and commit resources towards inefficient industries, which could gain short-term benefits under tariff concessions.
Despite Dr. Coomaraswamy’s enthusiasm over implementing the trade deals, local trade economists have consistently said in recent months that there won’t be any significant increase through these deals, if the local barriers to trade, which have so far held back Sri Lanka competitively, are not removed.

Over the past 17 years, Sri Lanka’s exports to gross domestic product has fallen from around 34 percent to approximately 12.5 percent, since the previous regime had focused on economic growth through inward-oriented, debt fuelled infrastructure development.