Sri Lanka in push to create Bay of Bengal economic area: Prime Minister
ECONOMYNEXT – Sri Lanka is working to stitch together a rapidly growing Bay of Bengal economic area, where the island will be linked to key parts of Southern India as a first step, Prime Minister Ranil Wickremesinghe said.
Sri Lanka’s planned Economic and Technology Co-operation Agreement (ETCA) will link fast-growing South Indian states with the island, creating a $500 billion economic area, Prime Minister Wickramasinghe said in Colombo.
The deal will be followed up with trade agreements with other Bay of Bengal nations, he told the opening session of the World Economic Development Forum in Colombo.
Sri Lanka’s North Eastern Trincomallee port will be an industrial hub, he said.
Sri Lanka was already taking with Singapore for an FTA, and China.
Sri Lanka’s exports have lagged the world in the past decade.
Wickramasinghe said incentives will be given for domestic industries to become more competitive, so they can go out and trade with the world.
Wickramasinghe said the country would also attract more foreign direct investment, which will also help drive exports.
China’s Vice Minister for Trade Wang Shouwen said his country was transformed by foreign direct investments.
About 44 percent of exports, 10 percent of national tax revenues, and 44 percent of total employment came from FDI companies, he said.
He said there were 850,000 foreign companies who had invested $1.7 trillion in the country.
In addition, funds, markets, know-how and technology FDIs also brought new ways of managing companies which eventually domestic firms, also learned, he said.
Wickremasinghe said Sri Lanka had joined China’s One Belt One Road Initiative, and China was expected to make more investment in the country.
Wickremasinghe said he wanted export firms have to create jobs paying more than $300 a month.
Although there were jobs in Sri Lanka below that price, the vacancies could not be filled and people were migrating to abroad, he said.
Remittances have taken the place of exports, he said. The new administration wanted to create domestic jobs in industry and services, he said, which will allow more people to enter the middle class.
Analysts have said Sri Lanka’s currency collapses caused by the Central Bank’s contradictory monetary and fiscal policies have tended to favour low-value exports based on cheap labour, forcing people to migrate to the Middle East to make a living.
High import duties have also made basic foods and housing construction more expensive.
Critics have said that inefficient domestic industries owned by businessmen close to politicians are uncompetitive but make profits by exploiting poor consumers with high import tariffs.
State actions of expropriation, expanding loss-making state enterprises and more recently retrospective taxes have also undermined Sri Lanka’s investment climate and investor confidence. (Colombo/Oct12/2016 – Update II)