Sri Lanka and China, despite tensions over the Colombo Port City, will proceed with the proposed Free Trade Agreement (FTA) aimed at strengthening economic and trade ties in both countries, top officials of both countries revealed. President Maithripala Sirisena is due to visit Beijing next week and the FTA and the Colombo Port City project [...]

The Sunday Times Sri Lanka

Sri Lanka and China FTA go ahead to re-balance ties with Beijing

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Sri Lanka and China, despite tensions over the Colombo Port City, will proceed with the proposed Free Trade Agreement (FTA) aimed at strengthening economic and trade ties in both countries, top officials of both countries revealed.

President Maithripala Sirisena is due to visit Beijing next week and the FTA and the Colombo Port City project are expected to figure prominently in the discussions. Local officials said a pre-visit announcement on the Port City partly supportive of the Chinese position is also likely to ‘calm the waters’ – similar to the release of Indian fishermen ahead of Indian Prime Minister Narendra Modi’s visit.

While there is a huge deficit against Sri Lanka in China-Sri Lanka trade relations, China’s ambassador in Sri Lanka Yi Xianliang had recently stated at a Colombo meeting that China is looking forward to provide some relief to Sri Lanka through the FTA.
Chinese commercial counselor, Wang Ying Gi said negotiations are underway to sign the agreement as soon as possible. There was a slight delay in the commencement of a third round of talks on the agreement as a result of changes in the officials in ministries and department involved in the process.

At present trade is worth US$3.1 billion between Sri Lanka and China, out of which $2.9 billion worth of goods and services are imported by Sri Lanka. Sri Lanka exports only $200 million worth of goods and services to China.

“Sri Lanka has all the right ingredients to become a regional trading hub, but wrong policies and a misalignment in trade and foreign policies have resulted in the present, sorry situation,” Deputy Minister of Policy Planning, Economic Affairs, Dr Harsha de Silva told the Business Times adding that the Government needs not only to reverse the trend, but to actively promote exports.

In this background, any bilateral or multilateral trade agreement that benefits Sri Lanka must be pursued. Please turn to page 14
Sri Lanka and China
“However we must not blindly enter into such agreements. We must study in detail our own experiences,” he added.
He said the policy of the previous regime was not conducive for exports with the exports-to- GDP ratio falling to 15 per cent at present from about 35 per cent a decade ago.
“This is the complete opposite of what a country that is attempting to become a trade hub should be faced with. In fact, we want to increase this ratio to over 100 per cent”, he said.

R.D.S. Kumararatne, Director General of Commerce, noted that Sri Lanka has had two rounds of preliminary negations on the proposed FTA with China and the dates for the third round are yet to be announced.
Two rounds so far held were attended by an expert negotiating team convened by the Ministry of Finance for which few of the officers from his department too participated as the members to that team, he disclosed.

Sri Lanka is negotiating with the Chinese government to provide full tax concessions on the islands exports of apparels, coconut, rubber and tea-based products, gems, precious stones and jewellery.

A senior official of the Treasury said the aim is to export $500 million worth of tax free apparels to China under this agreement.
“We have clearly stated that professional services in the island would not be opened up for China. Instead, Sri Lanka plans to provide concessions to China on imports of constructions related heavy equipment and machinery not produced in Sri Lanka,” he said.

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