Sri Lanka to enter global value chains with Indian, Chinese links: CB Governor

ECONOMYNEXT – Sri Lanka will have better prospects to enter global value chains with closer links to India and China, Central Bank Governor Indrajit Coomaraswamy said.

Global value chains are supply chains for a product from conception and design, to marketing and distribution to a customer being distributed geographically across the globe.

"We feel with China’s involvement with the Hambantota Port and the industrial zone that is developing around it, we have prospects of breaking into supply chains through that development," he said.

He was speaking via video conference at a forum organized by the London-based think tank, the Overseas Development Institute.

Coomaraswamy said the industrial zone may attract Chinese investment and help Sri Lanka link to global value chains, in a similar manner to South East Asian countries which benefitted with such Chinese investments.

"In addition, what is happening in India could bring about propitious circumstances in replicating what happened in East and South East Asia when first Japan, and then China rose."

"In the past, the Indian industry has been sluggish and mainly inward-looking."

"Now, the Making India strategy on the one hand, the GST which was sold as one tax, one market, one nation, has made it easier for countries in the region to be able to trade with India."

"Most of all, even though there’s proximity between Sri Lanka and India, in the past, distance was created due to lack of infrastructure."

Coomaraswamy said with infrastructure being developed in both countries now, Sri Lanka’s opportunities to tap into global value chains through India would grow, especially with the Making India strategy.





He said the largest part of trade in Asia has been through global value chains for some time, but Sri Lanka has not been able to tap into this.

"There are many reasons, the main one being the anti-export bias we have tended to have in our overall policy matrix, and the exchange rate, high effective protection with para-tariffs have meant that we have not been able to break into this game."

"These are being addressed with the exchange rate being managed flexibly and para-tariffs are being gradually eliminated," Coomaraswamy said. (Colombo/May02/2019-SB)

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