Sri Lanka slips to 103rd in Global Enabling Trade Index

• Vietnam at 73 ranks second most improved economy; Bhutan figures third best performer
• South Asia most closed region in the world; on average imposes a tariff of 16.7% on imported products up from 15.8% in 2014

Sri Lanka’s ranking in enabling international trade has worsened during the past two years forcing the country slip down in the latest global ranking.

According to the Global Enabling Trade Report 2016 published by the influential World Economic  Forum and the Global Alliance for Trade Facilitation, Sri Lanka was ranked at 103rd out of 136 countries. In the previous ranking released in 2014, Sri Lanka was placed at 96.

Sri Lanka’s deterioration is despite several other South Asian nations improving in their efforts at enabling global trade whilst Vietnam was the second best performer. India has climbed four places to 102nd whilst Vietnam has shot up 14 places to be ranked at 73. Bhutan rose 12 positions to be placed at 92. Other South Asian nations Pakistan (122nd) and Bangladesh (123rd) had slipped as well. The report identified South Asia as most closed region in the world as on average, it imposes a tariff of 16.7% on imported products (increased from 15.8% in 2014).

The Enabling Trade Index (ETI) assesses the extent to which economies have in place the factors facilitating the free flow of goods over borders and to their destination.

These factors are organized in seven categories: Domestic market access; Foreign market access; Border administration; Transport infrastructure; Transport services; ICT infrastructure; and Operating environment.

Produced every two years, the report is a benchmark for leaders looking to boost growth and development through trade.

On a scale of 1-7 (7 being the best) Sri Lanka’s overall ETI score was 3.9. The most problematic factors for importing were tariffs and non-tariff barriers, burdensome import procedures and corruption at the border. Most problematic factors for exporting were identifying potential markets and buyers, Access to imported inputs at competitive prices and Tariff barriers abroad.

The report said increased integration into the global economy of the economies that comprise the Association of Southeast Asian Nations (ASEAN) has made the region a more accessible market for trading goods than either the European Union or United States. 

ASEAN’s progress as an economic power comes at a time when the United States and European Union are becoming less open, according to the report. However, ASEAN’s progress in other areas measured by the index is less pronounced. As a result, the best economies for enabling trade tend to be in Northern and Western Europe, with the notable exception of Singapore and Hong Kong SAR, in first and third places, respectively.

 “Free trade remains the most powerful driver of global economic development and social progress. The challenge for leaders today is to confront protectionism but they also have a duty to make trade a source for more inclusive growth,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.

Another key finding of the report is the limited success with which governments are tackling border administration efficiency. Reforming administration is recognized as a “low-hanging fruit” capable of producing disproportionate gains for both small and large businesses compared to the financial and political capital required to implement them. This lack of momentum could be seen as a cause for concern as the World Trade Organization’s 2014 Trade Facilitation Agreement comes into force in 2017.

A further finding of the report is that, despite popular perceptions, large swathes of the global population are still unable to participate in international trade or global value chains. Larger emerging markets in particular fare poorly in the ETI, with China representing the only top-10 most-populous nation in the top half of the index. Six others, home to 2.4 billion people, rank beyond the 100th mark – India (102nd), Brazil (110th), Russia (111th), Pakistan (122nd), Bangladesh (123rd), and Nigeria (127th).

 “Businesses and entrepreneurs in many developing and emerging economies are being constrained from the global marketplace due to costly and inefficient border processes. Governments must consider trade facilitation reforms as a strategic priority to make trade work for all,” said Philippe Isler, Director of the Global Alliance for Trade Facilitation.