German companies running out of patience, warns German Ambassador
Two years after restrictions were introduced German companies in Sri Lanka are feeling the pinch of continuing import bans and could consider shifting out, a diplomat warned this week.
Sri Lanka has vowed that the prohibitions--meant to stem the outflow of foreign currency amidst an economic crisis and sovereign debt default--are “temporary”. But they were imposed in April 2021 and there’s no sign of a reversal. “There are now indeed a handful of companies observing the situation and, if the import ban takes another two years, I don’t think they have the patience to stay,” Holger Seubert, German Ambassador to Sri Lanka, told journalists yesterday. Countries like Nepal and Bangladesh were attractive alternatives, he said.
Japanese giant Mitsubishi Corporation recently wound up operations in Sri Lanka. There are around 200 German companies here. In 2018, the Delegation of German Industry and Commerce in Sri Lanka (AHK Sri Lanka) was set up to promote bilateral economic relations between the two countries. However, businesses face significant challenges.
The Ambassador met journalists along with Peter Ramsauer, MP, Rapporteur for Sri Lanka in the Foreign Affairs Committee of the German Bundestag (Parliament), and Deputy Head of Mission Olaf Malchow. Dr Ramseur was on a four-day visit and held talks with a range of officials including President Ranil Wickremesinghe.
Many German companies entered Sri Lanka years ago and chose to stay. “They are still here and they are ready to invest,” Mr Seubert said, having met AHK representatives with the visiting MP. But the import ban is a major impediment.
“Frankly, we do not see it as a temporary measure,” he pointed out. “Temporary is always relative but it was (started) in April 2021. It’s now two years of a ‘temporary measure’ and there’s no end in sight.”
Not only did the ban contravene World Trade Organisation (TWO) rules, it badly impacted export-heavy Germany. It was now a “one-way street from Sri Lanka to Germany”, in terms of exports. This was unfair. Companies needed imports--even of small parts--to do business.
Häfele, a German family firm with a presence in Sri Lanka, had to stop production for several months. A supplier of kitchens, etc, the company couldn’t procure what it needed to continue operations as many items were on the banned list.
“Our trade balance (with Sri Lanka) is relatively small due to all these problems I’ve mentioned,” Mr Seubert explained. “Look at your trade balance with China. This is the problem you have: that China is exporting so much to Sri Lanka and you are not allowed probably, or not willing, I don’t know, to export as much to China. There, the problem starts. There, you are running out of dollars and foreign exchange.”
Among other subjects discussed during Dr. Ramseur’s visit were Sri Lanka’s overall economic situation, perspectives and conditions German companies faced for doing business. “They have, of course, quite a few problems,” he related, calling the import restrictions “very harmful”.
Meanwhile, Sri Lanka has long urged Germany to consider more foreign direct investment. This came up again during Dr. Ramseur’s visit.
Both big German firms and Mittelstands, family-owned businesses, were prepared to invest. But they needed “political stability, social stability, reliable legal framework with investment protection”, Dr. Ramseur said. “German business culture is not to go to a country, make money, take the money and get out,” he explained. “The philosophy is to go to a country and stay, through crisis and everything.” Therefore, they considered multiple factors before setting up somewhere.
“To put it very briefly, the framework is not as reliable as we would wish to see,” the Ambassador agreed. “We need something as reliable as we have in Germany. You know what you get when you invest in Germany because there are clear rules and everybody adheres to these rules. Here, everything is a bit ad hoc.”
“We are always told, ‘Listen, if you have a problem let us know and we will solve this bilaterally’,” he continued. “But that’s not how we do business. We do not want to sort out problems, talking every week to the Presidential Adviser or something like this. We want to see a framework which is reliable, a framework without corruption, of course. Then, much more would be possible.”