Sri Lanka’s import restrictions will pose issues as its policy on open trade has become a cause for concern among European Union states. Germany which also holds the EU Presidency and is a non- permanent member of the UN is of the view that Sri Lanka’s current trade restrictions are “detrimental” to Sri Lanka as [...]

Business Times

Germany says import controls policy “detrimental”

Sri Lanka needs to be open to remain attractive to foreign investments: German ambassador

Sri Lanka’s import restrictions will pose issues as its policy on open trade has become a cause for concern among European Union states.

Mr. Jorn Rohde

Germany which also holds the EU Presidency and is a non- permanent member of the UN is of the view that Sri Lanka’s current trade restrictions are “detrimental” to Sri Lanka as it increases prices for consumers; and the country’s exporters are impacted since most value added products require imported items, German Ambassador Jorn Rohde said in an interview with the Business Times in Colombo.

Germany is a key partner of Sri Lanka as it continues to assist the country in increasing the vocational training through its popular German Tech colleges; in funding the SME sector; and engages in social cohesion and reconciliation efforts.

“Sri Lanka is the only country in the world to impose extended restrictions,” he said pointing out that just last month Vietnam had signed a Free Trade Agreement (FTA) with the EU.

In this respect he noted that if Sri Lanka wants to remain attractive for investments then they need to remain open.

“Trade is not a one-way street and the EU is the biggest trading partner of Sri Lanka,” Mr. Rohde said adding that “if you have a prolonged restriction on imports then it will at some stage be a point of discussion at the World Trade Organisation (WTO).”

Under the current circumstances “where do possible investors go?” he queried adding that Germany hopes Sri Lanka remains committed to an open trade regime.

Social and religious tension

Commenting on the concerns within the country in relation to the religious and ethnic concerns in terms of reconciliation, he pointed out, “The Presidential election results of last year show a clear division between communities and religions where there was a clear majority support from the majority community and a clear minority support for the opponent.”

Mr. Rohde pointed out that he had been made aware of the concerns of the North and East where “since November land returns (back to their owners) have largely stopped.”

Following the end of the war there has been a return of certain lands held by the armed forces to the people to resume their livelihoods.

Moreover, the task force established in the preservation of archaeological sites in the East has been criticised and Mr. Rohde had been informed by concerned parties by activities of the non inclusion of minorities in it who are a majority in the East.

President Gotabhaya Rajapakse appointed the Presidential Task Force for Archaeological and Heritage Management in the East chaired by Defence Secretary Maj. Gen. (Rtd.) Kamal Gunaratne and comprising 11 members with no inclusion of Tamil or Muslims who form a majority in the Eastern province of the country.

“But because it was mentioned in the media and representatives of minority communities I spoke to expressed clearly there is a problem” and in this respect “there is room for improvement”, he pointed out.

Trading partners

In addition the ambassador explained that Sri Lanka should also consider India as a supermarket for trading.

“All over the globe your biggest trading partners are usually your neighbours. Only in South Asia the situation is different since for example Sri Lanka’s main export destinations are the geographically faraway EU, US and UK. For this anomaly to change you must have an open trading policy and increased regional cooperation. Neighbouring India with its 1.2 billion people for example provides huge potential to be the natural market for Sri Lanka,” Mr. Rohde said.

The ambassador also expressed concern over the loans given by China adding that this had been discussed in Germany as well whether they are undercutting in terms of prices and whether their loans are given based on accurate assessments carried out.

Germany has also been miffed by the government’s stance regarding tenders and raised the issue of transparency and fairness. The ambassador made specific reference to the Kerawalapitiya LNG power plant tender which had faced a number of issues particularly a conflict of interest in the case of Lakdhanavi Ltd which is also the lowest bidder but not awarded since it was said to have quoted too low a price and due to conflict of interest.

Lakdhanavi is a subsidiary of LTL Holdings also a subsidiary of the Ceylon Electricity Board that uses German technology.

“But if they (tenders) are postponed or cancelled or shrouded” in controversy then there is a concern for Sri Lanka as he pointed out, “This results in low rankings in transparency indexes and others which demotivates investors in doing business in Sri Lanka.”

“It is important to attract investors and to do so you need to open up,” the ambassador said.

Commenting on Sri Lanka’s logistics sector, he said that a key barrier to investment here is the 60-40 per cent rule applied at the Colombo port whereas “in all neighbouring countries no such barriers” exist.

Tourism partner

Responding to the query on Sri Lanka’s non inclusion in the list of countries to travel to, he said that the list of 15 countries can be seen as a first step towards a return to normal and that the absence of a country on this EU positive list should therefore not be considered to as being blacklisted. The list will be regularly updated to ensure that more countries can be brought in as soon as the situation allows with reciprocity with the country concerned.

The ambassador underlined his hope that – Germany being one of the major tourist source countries for Sri Lanka – tourism will recover as soon as the situation allows. In this regard he welcomed current plans by Sri Lankan Airlines to soon re-establish direct air links between the two countries again after it was stopped in 2016.

Mr. Rohde said Germany and the EU have a positive list of countries and noted this is not based on how countries fight the COVID-19 pandemic.

“We can’t repeat a repatriation process” as about 250,000 Germans were brought back home by tour operators, the Foreign Office charters and commercial flights, he explained.

In fact, the ambassador pointed out under the circumstances however, Maldives is currently opening up adding Germany maintains a policy of opening up to borders that reciprocate.

On trade, he said the EU is for an open trade system, and “we are in negotiation always with other countries,” adding that GSP + is an unilateral trade tool and in this respect, adhering to labour standards is important; further the present Prevention of Terrorism Act (PTA) does not conform to EU standards.

He pointed out that Sri Lanka has seen a 300 per cent increase in its fish exports to the EU and also textiles adding that tax free access is very “good advantage.” In 2010 Sri Lanka lost the GSP + concessions as a result of its human rights violations raised by the EU but regained it in 1015. Now the apparel sector is facing a crisis due to a slump in orders.

EU itself is likely to see a slump of about 6-8 per cent of its economic growth due to the current COVID-19 crisis that has taken a toll on the economies of the bloc.

Having completed a “wonderful four years” the ambassador leaves behind a word of caution insisting that governance is vital in terms of “enforcing rules, no impunity, providing services to your people and with a sustainable tax system.”

EU has funded Sri Lanka’s COVID-19 crisis with a 22.5 million Euros and Germany contributes 20 per cent to the funds of the EU.

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