Transiting from cricket to trade

Sri Lanka and New Zealand are planning to open high commissions in Colombo and Wellington to foster their budding economic relationship

Building on an exchange of visits by top officials of the two countries, New Zealand Trade and Enterprise Regional Director for India, Middle East and Africa Tony Martin headed a trade delegation to Sri Lanka earlier this month to foster business partnerships to expand the present $ 306 million trade relationship. He met with Daily FT to discuss plans, expectations and investment concerns during his time in Sri Lanka. Excerpts of the interview are given below:

By Uditha Jayasinghe 

Q: How has Sri Lanka and New Zealand increased their engagement over the past two years?

A: At the highest level we have had three major business delegations to Sri Lanka and that symbolises the level of interest the New Zealand government has to do business with Sri Lanka but in addition to that, New Zealand’s (former) Prime Minister led a trade delegation here in February 2016 and that was again a very positive signal. Prime Minister Wickremesinghe also visited New Zealand in the same year. So we can see ultimately the level of engagement has increased significantly. Based on that, and the strength of our relationship, the two countries have agreed to establish foreign missions in each other’s countries. So New Zealand will open a High Commission in Colombo sometime in the next two years and Sri Lanka is also talking about establishing a High Commission in Wellington. So I think that is a really strong indication of the relationship.

Q: A food and beverage company was not included in the business delegation and yet the largest New Zealand investment in Sri Lanka is Fonterra. Could you please tell us why there is such a divergent set of companies included in this trip and what sectors do you feel would be the most promising?

A: We have built ourselves up over the last 100 years on food and beverage exports and of course we have a presence here in Sri Lanka. However, if we see where New Zealand’s economy is moving to, it’s much more of a solution based focus in sectors such as ICT, healthcare, aviation and agricultural technology. So we have a mixture of companies in this delegation who are representing technology, healthcare and aviation types of industries. The reason for that is, we can see just how fast Sri Lanka is moving and the call was actually for partnerships in these types of sectors, just as much as food and beverage, where we traditionally were at.

Q: But what sectors, specifically, would investors be interested in? 

A: Well if I pick on aviation as a starting point, the megapolis project would require massive investment in development and infrastructure. There is a big increase expected in terms of tourism, passenger numbers coming through Sri Lanka. So there are two angles that New Zealand can provide in terms of companies that are represented in the delegation: one is air traffic control and air traffic management. So the skies are going to get busier with more aircraft and in New Zealand we have world class training facilities, so that is one dimension. The second dimension is pilot training, which would be really useful for Sri Lanka-based pilots, who are part of this growing industry.

Q: In terms of infrastructure what are you looking at? 

A: Well, there is an element in construction. There is a company delegation that operates in construction with new technology to support steel wool architecture but I think the much larger opportunity comes in technology-based solutions where we have companies that are able to provide alternative ways to service the population. We also have a pre-fabricated housing company that has developed low-cost housing projects for other countries in the region and we know based on the rural population here, there is definitely an opportunity to provide a symbiotic solution to the need for additional housing.

Q: Sri Lanka’s FDI levels have remained low despite eight years since the end of the war. What are your views about Sri Lanka’s investment climate?

A: From what we have seen from the Government, there is no shortage of desire to move Sri Lanka forward at a very fast pace but of course that does come with some expectation around FDI support as well as domestically funded projects. We really admire the ambition of Sri Lanka, especially given recent history and we are certainly looking forward to helping where we can but of course the Sri Lankan Government has some challenges to face in terms of meeting the needs of their foreign direct investors.

Q: Would high levels of debt and weak macroeconomic fundamentals be points of concern for investors?

A: I don’t think there is overriding concern because the macroeconomic conditions tell a story of a strong growth in the future. So we believe the Sri Lankan Government has some strong plans in place to deal with the current situation. The focus of our companies and our government is much more forward looking than the current climate.

Q: If you could pick the top three things you would like to see in a country you are taking a business delegation to, what would they be? 

A: Well, I think the openness and transparency of government partners is crucial. Being able to have the type of dialog to open the doors to our commercial enterprises to come through is really important. So that is number one. Second, the willingness of the public and private sectors to welcome companies from countries like New Zealand makes things a lot warmer and more receptive and inspires our companies to invest more heavily in the market. The third one, I think, is a little bit of a softer approach but it is around the relationship and the approach to partnership building. New Zealand exports to more than a 150 countries around the world and has all sorts of different relationships. We sense a really strong relationship with Sri Lanka based on some shared interests in areas of sport but also our people to people connections are a real strength; so that is a huge appetiser for wanting to do more business with Sri Lanka. 

Q: Fonterra has been in Sri Lanka for a long time but there has been little other investment. What do you think is the reason behind the lack of diversity? 

A: I think part of it is maybe our understanding of the opportunities in Sri Lanka. Our role in the trade promotion agency and the Sri Lanka entities is to increase those people to people links. This is a key way to understand where those key opportunities are, so more companies can follow the path Fonterra has carved here over time. 

Q: Two key challenges highlighted by investors to Sri Lanka is lack of land ownership and restrictive judicial environment, which makes it difficult for companies to exit the country. Are those concerns for you as well? 

A: Given the types of businesses that are currently engaging in new partnership opportunities with Sri Lanka, I don’t see those as major roadblocks for us. Maybe further down the track there are some considerations that we would want to discuss in more detail with our government officials but certainly in the short term I don’t see that as being a roadblock for us. 

Q: What are the considerations that you would like to discuss with officials?

A: We know that the Sri Lankan Government has got huge ambitions around these Free Trade Agreements (FTAs) and opening up the door to have access to the domestic markets here in Sri Lanka and also right across the region. In the back of people’s minds there will be some questions on what that would mean for current restrictions that would enable companies and businesses to get some scale of operations in Sri Lanka. So I think these types of things will remain in focus. 

Q: Lack of economic liberalisation has been pointed out already. Is that a concern in your view?

A: We are probably not at that stage yet where we would be feeling constricted by that, but of course it would be a question anybody would want to ask when you look at the long term opportunities in a market like Sri Lanka’s.

Q: Currently the trade balance is in New Zealand’s favour. What do you think Sri Lankan exporters can do to export more to New Zealand?

A: Having only been here a couple of days, an immediate one is tourism. I think tourism opportunity here is absolutely fantastic and again, the Sri Lankan Government has a very strong motivation to want to increase tourism numbers and immediately you see that as a great way to increasing trade. Secondly, Sri Lanka’s financial services and service offerings. In general, Sri Lanka holds a very enviable position not just geographically but also in terms of the English-speaking ability and education levels to increase service offerings to New Zealand. In commodity-based products, I think there will be a natural growth over a period of time to reduce the trade balance at the moment but I feel the biggest impact would be in the tourism and service sectors.

Q: Would you say that there is a point in reconnecting the Sri Lankan diaspora in New Zealand and building trade on that synergy?

A: Absolutely. We have about a 1000 Sri Lankan students studying in Sri Lanka at the moment and when there are a thousand students there are family and friends around them. They are a part of the wider New Zealand society so I think it is a strong angle for us to trade on and of course those students become mini-ambassadors for your country, which is a great opportunity for us to use.

Q: What developments would you like to see subsequent to this visit?

A: We have a strong work plan in front of us because we know high commissions will be opening up in Colombo and Wellington, and that our government officials, our colleagues on both sides of the equation, will have some expectations and build momentum. We see these trade visits as a really strong way to open the doors to dialogue that we really need to have to ensure that our companies have access to finding the right type of partners. So we can see over the next 18 to 24 months a lot more relationship building and the opportunity to get some new commercial partnerships underway and to really get to know each other a lot better. Once the high commissions are opened it would be a new era of our bilateral relationship. We have some relationships with the local chambers but we feel we can do more to build relationships. We manage Sri Lanka out of our office in Mumbai at the moment but as trade relationship and profile continue to grow, we will need to seriously look around at how we can service Colombo and the greater Sri Lankan market better.

Q: Any more trade delegations to visit this year?

A: We certainly have plans in play for additional trade delegations. I’m speaking here on behalf of the New Zealand Trade Promotion Agency. We are seeing an increase in the number of New Zealand companies who are viewing Sri Lanka as a great market. So by default that gives us a good justification to following up this mission with a further one, maybe following on similar sectors or expanding our horizons into new sectors.

Q: Are any of your companies interested in using Sri Lanka as a base to export to India?

A: That is being touted as another really strong reason for establishing a presence in Sri Lanka. At the moment we have representation in India but I think if we talk about the short term horizon, the focus on Sri Lanka is as a standalone market. Longer term, if company presence here grows, then we could leverage it to become part of the larger region. Commonalities between Sri Lanka and New Zealand are huge advantages. When you think about cricket and rugby, they give immediate talking points, and this commonality builds a pretty strong foundation for us to move onto more serious conversations about business and government relationships.