LBR LBO Summit
LBR LBO Summit

Sri Lanka must plug into global production networks: Harsha de Silva

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Aug 25, 2016 (LBO) – Sri Lanka needs to get into the game of global production networks and needs to treat trade agreements seriously, a government minister said.

Deputy Foreign Minister Harsha de Silva outlined Sri Lanka’s future path as a trading nation at a panel discussion organized by the Young Professionals Organization of UNP.

“Sri Lanka has always been a trading place with imports and exports both. Imports are actually the other side of the coin of exports,” de Silva said.

“For instance, In Hong Kong, exports to GDP is about 260 percent that is because imports are 220 percent and in Singapore, exports are 160 percent while imports are about 120 percent.”

De Silva said Sri Lanka should seek to tap into the new paradigm of global production networks since the island nation is not a natural supplier of large scale intermediate goods or raw materials.

Global Production Networks (GPN) goes beyond the concept of global supply chains and tries to capture both vertical and horizontal links across the sequence of a production process.

“Sri Lanka needs to get into that game. That’s why we need to look at these trade agreements very seriously,” de Silva said.

He said the government is trying to position Sri Lanka as the center of the Indian Ocean while opening investors the opportunity to bring a part of the global production networks here.

“The investors will then have the opportunity to use our duty free access to India, China, Singapore, and Turkey after we get these trade agreements done.”

“That is the unique selling point; that is the reason why people come here and invest here and it really doesn’t matter what you export.”

Unilateral Opening

The deputy minister said even though there are ongoing arguments on unilateral opening of trade barriers without bilateral agreements, they are not practical in Sri Lanka.

“If people are playing by the rule books, then academically you are right. But we are not living in a utopian world,” de Silva emphasized.

“We are living in a world where we want to be better by neighbor in the context of what is available to us; that is the real scenario.”

He said the Trans Pacific Partnership is all about opening up or liberalizing sectors within the economy and if a country is willing to open up that country will automatically become a part of the liberalized trade regime.

“Then you don’t need these bilateral agreements with India or China; but the reality is such that we have no other option,” he said.

“Take Government Medical Officers Association for an example, they don’t even let us open even MODE 1 saying it will be detrimental to Sri Lanka.”

De Silva who is an economist by profession said Sri Lanka’s openness is like it was in the 1970s.

“We are talking about so many things about how trade was liberalized by J R Jayawardhana and Premadasa era but we have actually gone back,” he said.

Actual customs duty has remained unchanged in the 10 or 12 years up to 2012, at around 10.8 percent, and all types of para-tariffs, non tariff barriers have been built on the customs duty, he said.

“If you have so much of non tariff barriers in imports that obviously leads to a slow down in exports. So you can’t argue we don’t need these agreements, because those agreements force us to liberalize.”