First FTA-driven bonus: An FDI pipeline

Friday, 31 January 2014 00:44 - - {{hitsCtrl.values.hits}}

Buoyed by its latest exports turnaround, Sri Lanka is now marshalling its FTAs to directly catapult into major global regions, and for the first time FTAs have become an FDI driver. “You will be eligible for even more free trade when we begin our FTA with yet another G20 economy in addition to India, which is China. As a result, 40% of the world population will be directly accessible to Lankan exporters,” said Minister of Industry and Commerce Rishad Bathiudeen yesterday. Bathiudeen was addressing an EDB-organised awareness session titled ‘Preferential Trade Agreements and FTAs for Lankan Exporters’ at the EDB Auditorium in Colombo. Joining the session were Deputy High Commissioner of India P. Kumaran and First Secretary of High Commission of Pakistan in Colombo Hasan Ali Zaigham. Under the SAFTA mechanism, Sri Lanka accesses the huge South Asian market while Sri Lanka’s bilateral FTAs with India and Pakistan give access to over 1.3 billion market inside the SAARC region (296 million, in addition to India and Pakistan). Under APTA, the sole such mechanism linking Chinese and Korean markets to Lanka, another 1.39 billion market access – resulting in overall direct access to 43% of the overall world market. Meanwhile, 2013 annual exports (provisional) showed a turnaround with a 6.2% surge to $ 10,397 million. “Thanks to the FTAs with India and Pakistan, Sri Lankan exporters can now export more than 8,500 product lines without tariff to these two promising markets. In fact, there is substantial trade growth after these FTAs were implemented,” said Bathiudeen. “India is Sri Lanka’s largest trade partner in the SAARC region. Bilateral trade between both countries totalled $ 4 b in 2012. This is a huge 508% increase from US$ 672 million trade in 2001, as a result of the FTA. Both countries are now targeting US$ 10 billion trade over a period of three years, with special focus on trade in favour of Sri Lanka. “Pakistan is the second largest trading partner of Sri Lanka in the SAARC region after India. A substantial growth in bilateral trade is seen after the FTA between the two countries which was implemented in 2005. Total trade has increased from US$ 158 m in 2005 to US$ 433.69 m in 2012. However, despite these FTA developments, I believe there is still unrealised trade potential that we can explore. There are many more product lines under FTAs that Sri Lankan exporters have not touched and it is now time to make use of them to achieve President Mahinda Rajapaksa’s national export goal of $ 20 billion by 2020.” DG – Commerce R.D.S. Kumararatne, addressing the session with an in-depth detail of Indo-Lanka trade, revealed: “We have made significant progress in our recent Indo-Lanka Secretary level discussions in New Delhi last week. As a result, to move trade faster, we have now set up a streamlined, two-tiered mechanism by formulating an on-the-spot problem solving system for procedural issues and an official level engagement method on trade policy issues so that exporters of both sides can better focus on their cargo.” Ministry of Industry and Commerce Secretary Anura Siriwardena said: “We had a very fruitful meeting with our Indian counterparts in New Delhi last week at the Secretary level trade discussions. There are opportunities and possibilities for trade with India for us. At our level, each and every officer is ready to work in a very cordial manner. Joint Secretary of Indian Department of Commerce Shri Arvind Mehta also agreed to address issues on the non-tariff-barriers faced by our exporters so that the FTA is fully utilised. Both sides will work together to address these.” Kumaran addressing the event outlined various sectors of Indo-Lanka cooperation and said: “What is interesting to see is mutual investment between India and Sri Lanka too has risen as a result of the Indo-Lanka FTA and strengthened over the years. We see opportunities in transhipment, ship building, construction, financial services, education and tourism. In the next two years, we have over $ 2 b in the pipeline for investment in diverse areas here – from telecommunication to hospitality to transport, banking and finance, hotels, sugar refining by our Renuka Industries, Darbur Corp’s juice processing project, real estate projects by Tata Housing, Krrish project, and the 600 m power plant in Sampur are some of them. On the other hand, Lankan investments in India too have been expanding – for example, Brandix has a project in our Vishakapatnam’s garment city with a huge investment of $ 1 billion. China is also now planning to invest in our Vishakapatnam’s garment city in several manufacturing plants.”

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