WHAT DOES WEDF MEAN FOR SRI LANKA?

Export is one of the main pillars of growth for any economy and today Sri Lanka pays a price for not prioritizing this element in the last decade, the slumping earning values are evidence.

However, coming to the island nation’s aid is the International Trade Centre (ITC), the joint development agency of the United Nations and World Trade Organisation (WTO), fully dedicated to supporting developing countries succeed in international trade and investment.

By accepting Sri Lanka’s bid to host World Export Development Forum (WEDF) 2016, after having evaluated the country with a finetooth comb, it not only allowed the world’s attention to fall on the aspiring and ambitious country, but also assists in charting the way forward.

With the two-day comprehensive forum, Sri Lanka will receive fine insights from global thought leaders in the private sector, whereas the government would discuss and look at options to help address the concrete challenges faced by businesses in navigating the world economy, enabling them to create more and better jobs.

The WEDF is essentially about talking business and doing business and authorities believe both components matter. The reason being, even though a trade-led growth has lifted hundreds of millions of people out of poverty, the reality is that companies in many developing countries still struggle to connect to international markets. This is especially true of the small and mediumsized enterprises (SMES) that account for most firms – and most jobs – in any economy, including Sri Lanka. Making trade possible, making trade happen The latest edition of the WEDF will focus on making trade possible and making trade happen. The ITC stressed that the trade agreements of the 21st century must respond to the economic and social realities of its time. In today’s trade landscape, production dispersed in value chains that extend around the world is witnessed. While this has created new opportunities for trade-led growth and job creation, the ITC notes that tapping into value chains requires countries to address tariffs but equally to open trade in services – services that range from logistics to telecommunications to financial services and tourism. Doing so, it is suggested that it is essential to look at how individual nations synergise trade opening at multilateral level with regional trade agreements, which now includes the so-called ‘mega-regional’ initiatives involving some of the world’s biggest economies.

With all eyes on Sri Lanka, the ITC pledged it will look at how the government can help trade and investment by improving the business environment. It will look at how trade and investment support institutions can provide targeted services to help businesses internationalize, the need of the hour for Sri Lanka.

Focusing on the theme ‘Trade for Success: Connect, Compete, Change’, ITC Executive Director Arancha González during her opening remarks said the agency would examine the three “critical determinants” for businesses to improve their competitiveness and use international markets to drive inclusive growth.

Keeping up with the world

It is no doubt that digital trade has rendered the entire services sector tradable, liberating it from the constraints of geography. It is acknowledged that even for physical merchandise, e-commerce has created new opportunities for ‘micro-multinational’ SMES to link up to customers around the world. However, according to González, much needs to be done to open the digital economy to all, from improving connectivity to facilitating payment systems or organising logistics.

To help businesses go digital, the ITC and Alibaba will be launching a new publication spelling out how Asian firms, how Sri Lankan companies, can use e-commerce to break into the Chinese marketplace.

Alongside these transformations in investment and trade, a revolution is underway on the consumption side, as the consumers increasingly emphasize social and environmental considerations in their purchases. “We must ensure that we improve the quality of trade while supporting all businesses to match standards and regulations,” noted González.

Ensuring benefits of open global economy reaped by all

At the outset, the forum drew attention to two issues that it aims at underpinning at the two-day deliberation.

The first is for trade to be truly inclusive. In that effort, it was stressed that it is mandatory to ensure the women and youth are not relegated to the margins as the economic power of women and youth is yet to be fully tapped.

The second is on harnessing the geographic location. The world’s centre of economic gravity is returning to Asia and it is estimated that by 2030 two-thirds of the global middle class will be in Asia. While this is good news for emerging nations, work is to be done to ensure all contribute to the process.

But we need to ensure everyone shares in this process.

“At the heart of the Indian Ocean maritime routes, Sri Lanka is strategically poised between today’s growth poles in East and South Asia and tomorrow’s growth poles in Africa. Sri Lanka cannot miss this opportunity to return to its rightful place in the trading routes,” asserted González, highlighting Sri Lanka’s significance in this regard.

Time for Pearl of the Indian Ocean to shine

Sri Lanka was known as an important maritime crossroad between the Asian mainland and Africa and the ITC states this echoes even more powerfully in the modern global economy as it is in a geo-economic sweet spot between today’s growth centres in Asia and tomorrow’s growth centres in Africa.

“Today, Sri Lanka’s outward-looking, skilled population is a major economic asset and competitive advantage. Geography and human capital, combined with a growing peace dividend, give the island tremendous potential as a regional and even global hub for trade,” noted the trade expert.

She went on to add that it is “not time to make the most of this potential. It is time to restore Sri Lanka to its historic role as an important trading hub.”

Stating trade is not an end in itself, she explained it is the means to lift incomes and create more and better jobs. It is a means to connect the unconnected: farmers, SMES, youth and women.

“Trade in Sri Lanka means greater value addition, which can generate better paid jobs. And this in turn means greater market opening – at home and abroad – to foster increased business competitiveness and economic diversification.”

Partnering to help SL achieve its ambitious agenda

In the ITC’S latest attempt to help revive an emerging nation, in Sri Lanka, it will assist in three areas.

The first is in the building soft infrastructure that would contribute to increase value addition and trade across the board. The areas of focus would include agriculture, fisheries, manufacturing and in the potential services trade. While the agency has already extended a helping hand, it stressed that it is a transparent regulatory framework, effective trade facilitation for exports and imports and investment in meeting public and private standards.

The second area of support will be in domestic trade policy and international cooperation. The objective of this effort would be to reduce the negative effects of the 21st century barriers to trade – non-tariff barriers, to modernize the trade agenda so that it takes into account the importance of e-commerce and e-solutions and finally to place the SMES at the heart of national, regional and global trade discussions.

The last and the most imperative area of support would be in investing in people, especially women and youth, so that the benefits of trade are distributed more broadly.

“Women are the untapped potential in global trade – what I often call the ‘third billion’. Empowering women as equal economic actors is a prerequisite for broadbased growth and poverty reduction,” expressed Gonzales.

She expressed that she is of the firm belief that Sri Lanka’s economic agenda – of value chains and value addition – is the right one.

“The ITC looks forward to supporting Sri Lanka’s pursuit of inclusive growth and poverty alleviation. Through a new fouryear project, with financial backing from the European Union, we will assist Sri Lanka in ensuring trade impact for good,” said Gonzales affirming the agency’s commitment.

Acknowledging SL’S export status

When Mirror Business sat down with Gonzales this week for a one-on-one discussion, the key takeaway was that essential from Sri Lanka’s side is quality investment in all areas of work, speed in reforms and being open to new ideas.

Prime Minister Ranil Wickremesinghe shared similar sentiments when he addressed a fully-packed audience that included local and international delegates.

Acknowledging the event is held at an opportune time for Sri Lanka, he shared much is being done to refocus the attention on exports, growth and expansion of employment. For about a decade, the island nation lost its focus on exports. Its priorities within that period were to overcome the war and to earn through foreign remittances.

Sri Lanka back then had the GSP Plus to enter Europe but so did Bangladesh. Down the line, it was given up, while Bangladesh strategically held on to the same. The outcome – Bangladesh virtually increased its export earnings on garments alone by fivefold.

“We focused instead on foreign remittances but that is limited. When people want good jobs what they want to enter the middle class, they want a higher income. That growth can come only through exports, not through remittances. Remittances will send you a limited amount (of earnings) for a large number of people,” shared the premier in an attempt to highlight to the audience the reason for the country’s grim export performance.

“We missed those opportunities of growth. We missed the revenue. We depended on foreign debts, commercial debts and commercial borrowings. The end result was that the people in this country didn’t have satisfactory jobs. They certainly had jobs but felt they were underemployed,” he added.

Rearranging priorities

In the refocusing efforts, it was shared that the new regime’s primary focus is on fulfilling its political target of providing one million jobs and expanding the middle class.

“Achieving the same is no different than going for war,” he said.

“For us this is a war, not one that killed people, which we have put behind, but how do we get investments and go out capture the export markets to give a future to our people,” said Wickremesinghe.

Keeping this agenda in mind, he said resources are being allocated in making Sri Lanka the hub of the Indian Ocean, for business, logistics and finance. This will be achieved by developing the three major ports in Hambantota, Colombo and Trincomalee and the two international airports in Katunayake and Mattala.

Plans are underway in making facilities available for logistics and communication, to make the nation attractive for business and finance. The next step would be in making Sri Lanka the platform for competitive value addition so it can join the global value chain.

“That is in short our strategy. We spent one year working out the details, most will be announced this month or next month with the budget. This is basically the strategy,” he said.

Furthermore, in an effort to make Sri Lanka the hub of the Indian Ocean, it was shared that infrastructure is focused on one large corridor, which is expansion to Wayamba Northwest, which the premier said would take the spillover of industries form the Western Megapolis. The Western Megapolis itself, which will be a mega city of 8.5 million people and is gearing up to host a financial city and offshore financial centre between Singapore and Dubai, is expected to contribute in the efforts of reaching higher exports.

Then is the southern development that is focused on tourism, which is Sri Lanka’s low hanging fruits.

The rising East is another “corridor” where development is expected to help boost trade, thus employment. Trincomalee is being transformed to become an economic hub, one that will service the Bay of Bengal and look at focus on industries and past potentials of tourism.

Coming full circle

However, Sri Lanka will only complete the circle when it finds markets. The PM said this week is scheduled for a trip to Brussels to renegotiate the GSP Plus. While at a glance it seems good, he stressed that unlike in 2001, where Sri Lanka’s growth depended only on Europe, it is imperative to note and the ITC chief highlighted that the shift is coming to Asia.

With Asia being identified as the next big thing in the international arena, Sri Lanka has expressed keenness in entering into preferential trade agreements with its regional peers, namely India, China and Singapore.

With India it is currently negotiating the Economic and Technology Cooperation Framework Agreement (ETCA), paving the way to have closer ties with the neighbouring giant it cannot afford to ignore.

Wickremesinghe pointed out that not only would this agreement help build stronger ties with India, it will help strengthen trade relationship with the five southern states. According to him, the five states together with Sri Lanka are the fastest growing in the subcontinent and currently have a combined GDP of US $ 500 billion.

An FTA is also negotiated with Singapore and the triangular arrangement will allow Sri Lanka to reap a number of benefits, he stressed. Not stopping there, the PM said Sri Lanka looks to negotiate FTAS with other countries of the Bay of Bengal.

“It will be a fast-growing area with fastgrowing income in the coming 20 – 30 years,” he told the audience in an attempt to provide assurance.

Under the One Belt One Road initiative, the nation is in talks with China for an FTA and with Japan discussions are underway on having a Comprehensive Economic Partnership dialogue.

“It is this way we are looking at the Asian and European markets. How the USA will be developed we will only know after November when the new regime comes in, but we have made the plan as to where our markets should be,” noted Wickremesinghe.

A treat for investors

Not forgetting to reward investors to ensure they not only remain but also enter, it was said the proposed incentives for FDIS will be announced soon and the process will be accelerated. Ensuring the locals are given a fair share, he emphasized the authorities will focus and extend incentives for the domestic manufacturing industry, so they become competitive and more out to the world.

“We have a fairly good manufacturing industry catering to the domestic market but that alone is not enough. That will not create any more employment. We have to go out. As we become competitive, while we are encouraging FDIS, we understand that our local industries have the potential to expand and go to the nearby markets which they know well,” he said.

Elaborating on the incentive package, he pledged that “sufficient” incentives will be extended so that the local players can obtain the necessary technology to up their processing game. He suggested it be sued to also train human resources.

PM’S commitment

Spelling out the areas that will help boost exports and thus create employment, he said the aim is to create employment where the average income would be no less than US $ 300 per month.

“There are many jobs under US $ 300 that are not even filled. So the reality is that we have to find jobs that will allow one to earn a minimum of US $ 300 a month, he stressed.

According to Wickremesinghe, focusing on these areas would increase the purchasing power, thus resulting in Sri Lanka having a large consumer market.

“We want better for our people – a better income for our people. They should have a secure future. This is the way to expand the middle class and the way to secure the future is to go through the export market, open up our services,” he opined.

He reiterated that this is the war he wants to fight. Pointing out the global outlook is not favourable, it was said as a small country, every billion dollar counts.

“If you look at every billion dollar then it is easy to get into the market because we are small. Our small size can be an advantage but requires specialization and new initiatives. To achieve this objective, we are committed,” he said.