OPA forum says economy must become more export-oriented to benefit from FTAs

Wednesday, 19 June 2024 00:30 -     - {{hitsCtrl.values.hits}}


A seminar on the “Economic Impact of Free Trade Agreements” conducted recently by the Organisation of Professional Associations (OPA) revealed that while free trade agreements offered many advantages to Sri Lanka, the country’s economy needed to become more export-oriented in order to fully enjoy these benefits. 

The speakers at this event were International Trade Office Chief Negotiator K.J. Weerasinghe, Federation of Chambers Sri Lanka President Keerthi Gunawardana, and KIK Lanka Ltd. Chairman Lalith Kahatapitiya. The event was organised by the National Issues Committee and the Construction Industry Committee of the OPA, and was moderated by Bhanu Wijayaratne. It was attended by office bearers and members of the OPA, including OPA President Sarath Gamage, OPA President-Elect Sujeewa Lal Dahanayake, and OPA General Secretary Tisara de Silva.

Describing the vision of the Sri Lankan Government with regard to FTAs, Weerasinghe said that the main aim is to integrate with the largest economies in Asia for export diversification and increased investment. He observed that the main pillars of Sri Lanka’s trade relations were South Asia, USA and EU, and RCEP countries of East Asia. He noted that FTAs were vital for Sri Lanka as sustained economic recovery required increased exports of goods and services as well as more FDIs. 

Moreover, given our small internal market, FTAs would enable Sri Lanka to attract investment at scale while stimulating productivity.

Weerasinghe observed that Sri Lanka had signed four FTAs in total. Apart from the existing ones with India and Pakistan, FTAs with Singapore and Thailand had been signed recently. In addition, the Economic and Technology Cooperation Agreement (ETCA) with India and the China-Sri Lanka FTA were being negotiated, while FTAs with Malaysia, Vietnam, and RCEP were proposed. They were negotiating PTAs with Bangladesh and Indonesia. 

Furthermore, the Government was seeking a FTA with the UK, which is our most important market for garments. 

Weerasinghe revealed that an overarching goal of the Government was to eventually join the Regional Comprehensive Economic Partnership (RCEP), which is a free trade agreement among Asia-Pacific countries, including ASEAN.

Gunawardana pointed out that after the India-Sri Lanka FTA came into effect in 2000, Indian imports had increased sharply, reaching $ 4.6 billion in 2022. However, a similar increase in Sri Lankan exports to India has not occurred. He attributed this to the presence of non-tariff barriers such as stringent quality standards, customs procedures, and other regulatory measures. He highlighted that the effectiveness of FTAs can be undermined by the lack of complementary national policies. 

Sri Lankan enterprises were hampered by limitations in technology, finance and expertise, as well as inefficient logistics, poor infrastructure, and excessive dependence on primary and low-value-added exports. Furthermore, attracting substantial foreign investment was difficult owing to our small market size and high costs. There was also a mismatch between FTA benefits and the competitive strengths of our industries. Gunawardana called for a multifaceted approach in addressing these issues.

FTAs are powerful tools that have been used by many countries, Kahatapitiya noted in his speech. However, he asserted that in Sri Lanka, it has contributed to the trade imbalance increasing steadily. He emphasised the need for an export orientation of domestic industries as well as a focus on high-valued sophisticated products, such as electrical and electronic equipment. He stressed that government help was essential in achieving these objectives.

The seminar concluded with a lively Q and A session in which it was emphasised that FTAs were not a panacea for all economic ills and that it was also essential to address economic structural issues, engage in export diversification, and encourage entrepreneurship.