ISSN: 1391 - 0531
Sunday, February 25, 2007
Vol. 41 - No 39
Financial Times  

Export opportunities - passage to India and Europe

By Antony Motha

The Free Trade Agreements (FTAs) that Sri Lanka has entered into with India and Pakistan have enlarged the export market that Sri Lanka’s business fraternity has easier access to. More recently, the tariff concessions that have been made available by the European Union (27 EU countries) have provided a further impetus to the country’s export opportunity.

The Ceylon National Chamber of Industries organized a seminar at the Taj Samudra earlier this week, to highlight these opportunities.

India/ Pakistan
Dr Nihal Samarappuli, Executive Director - Research & Documentation – BOI, talked of the large opportunity that has been created by the India and Pakistan FTAs. He indicated that the ILFTA (Indo Lanka Free Trade Agreement) has resulted in preferential and easy access to the large and burgeoning Indian market. Under the ILFTA that came into effect in March 2000, more than 80% of tradable tariff lines/ products attract zero-duty on import into India. India has now overtaken Japan to become Sri Lanka’s No. 1 importer.

Explaining his method for selecting potential sectors and products, Dr Samarappuli indicated that, firstly, the item should not feature on India’s ‘negative list’. (This is a list that includes items on which protection to local industry is considered essential.) Thereafter, the potential trade value and the degree of duty advantage vis-à-vis other countries need to be considered. Finally, qualifying criteria - ‘rules of origin’ and domestic value addition - need to be assessed. “Using this method, India looks like an extremely attractive market for our rubber based products,” he said.

Allaying fears that the ILFTA could overwhelm Sri Lanka, Dr Samarappuli gave the example of the North American Free Trade Agreement (NAFTA), which involves the US, Canada and Mexico. “Mexico has benefited the most from NAFTA, compared to the bigger countries.” He suggested that the same could be the case for the ILFTA. This looks like a valid observation because, since the agreement came into effect, bilateral trade has multiplied and the Import-Export ratio has improved from 10.8:1 (in 2000) to 2.5:1 (2005).

India and Sri Lanka are currently in the process of negotiating a Comprehensive Economic Partnership Agreement (CEPA). This will be an improvement over the ILFTA since it is expected to (a) reduce the negative list, (b) include services within its ambit, and (c) add a chapter on investment.

Europe
The EU’s concessions, which have provided duty-free, quota-free access for 7,200 products, come under the Generalised System of Preferences (GSP) scheme. These concessions are conditional to Sri Lanka’s meeting specified standards on human development, labour conditions, environmental protection and good governance.

Explaining this condition, A K Perera, Deputy Director General – Dept of Commerce, said that the EU’s broad concessional guidelines are valid for a ten-year period from 2006 to 2015. The specific scheme runs for an initial three-year period that ends in December 2008. Before the expiry of this scheme, the EU will evaluate how Sri Lanka has fared against its performance parameters - and could, as a consequence, modify the scheme.

Highlighting the export opportunity that has been created by the GSP scheme, George Perera, Deputy Director - Marketing EDB (Export Development Board), pointed out that most of Sri Lanka’s recent export increase has come from the EU market. Despite this fact, he said, the EU is a buyer’s market and therefore one that is difficult to make inroads into.

A K Perera also cautioned that the current trend is towards reduction of import duties by all players in the WTO. Hence, a myopic dependence on preferential tariffs is not entirely a good situation. Manufacturers should simultaneously improve their productivity, so that the market gains are sustainable. Perera cited China as a country that is competitive even after paying customs duties.

Sunil Wijesinha (Chairman, Dankotuwa Porcelain Ltd), Lalith Kahatapitiya (Chairman, KIK Lanka Ltd) and Mr Ananda Rajapakse (Chief Executive Officer, Orange Electricals Ltd) shared the stories of their success in the export market.

 

 
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Copyright 2007 Wijeya Newspapers Ltd.Colombo. Sri Lanka.