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1,700 goods to China receives 27 pct tax
concession but usage less than 5 pct
SL exporters unaware of trade concessions
Sri Lankan exporters are going through tough times as margins continue to be squeezed due to depressed demand caused by the global financial crisis, high domestic production costs and difficult or limited access to credit and all the while, the bulk of preferential tariff lines under various trade agreements are hardly being made use of to expand markets and explore new ones.
A senior economist says Sri Lanka uses less than 5 percent of total preferential tariff lines available for over 1,700 products that can be exported into China because Sri Lankan exporters are unaware of these trade concessions.
Dr. Saman Kelegama, the Executive Director of the Institute of Policy Studies said Sri Lanka and China are both members of the Asia Pacific Trade Agreement (APTA) where a 27 percent tax concession is available for over 1,700 Sri Lankan products exported to China.
"During the fourth round of APTA negotiations to be held later this year, participating countries will seek to increase preferential margins (or tax concessions) to 50 percent and increase exports that would be covered to over 2,000 during the next one and a half years," Dr. Kelegama told the Sri Lanka-China Business Forum last Friday.
"These concessions have to be publicised and exporters need to be made aware of this programme. Trade authorities need to raise this awareness among exporters and increase its usage," he said.
"About 15 percent of the tariff lines under APTA (for exports into Bangladesh, China, India, Cambodia, The Philippines, South Korea and Thailand) are completely untouched by Sri Lanka.
He said Sri Lanka used less than 5 percent of the preferential tariff lines for exports to China alone.
Despite the global economic crisis, China’s economy is forecast to grow by 8 percent this year.
"China has a growing middle class which is expected to reach 400 million by 2010. They would have increasingly differentiated tastes and this would result in the creation of a major market opportunity that should be captured by Sri Lankan exporters," Dr. Kelegama said.
He said Sri Lankan exporters could explore niche markets for apparels and tea.
"Chinese demand for gems and jewellery is rapidly mounting and Sri Lanka has preferential tariff lines for gems and jewellery exports to China under APTA so this must be exploited," Dr. Kelegama said.
Herbal products, spices, seafood, vegetables, carbonated coal, rubber and coir are some of the other export products that could find markets in China.
"There are concerns that Chinese imports could flood the domestic market but we need to think of the positive benefits consumers would have. Chinese imports have provided lower cost high quality alternatives for consumers. It has also provided lower cost raw materials for production," Dr. Kelegama said.
Poor usage...
The Minister of Export Development and International Trade, Prof. G. L. Peiris, told exporters last Friday that they were not making enough use of concessions available under international free trade agreements Sri Lanka is signatory to.
"You need to make more use of these bilateral and other trade agreements, specially the free trade agreements with India and Pakistan. We are not making as much use of these arrangements as we should," he told exporters at the 2008 Export Awards organised by the National Chamber of Exporters last Friday.
"Exports are no longer limited to physical products. Services must also be included," Prof. Peiris said.
Sri Lanka was expected to sign a Comprehensive Economic Partnership Agreement with India last year which included services but is in cold storage now after lobby groups pressured the government to abandon the move.
The President of the National Chamber of Exporters, Rohan Fernando, in his Presidential Address, stressed the need for Sri Lankan exporters to explore new opportunities in China.
"We have kept away from China due to perceptions that language would be a barrier and that it would be difficult to compete with cheap goods. But we should remember that China is the second biggest economy and the fastest growing economy," Fernando said.
SL passports to Chinese...
Dr. Kelegama said China’s importance to Sri Lanka’s economy was on the increase.
China increased its aid to Sri Lanka from a few million dollars in 2005 to about one billion dollars in 2008. In terms of FDIs, China is ranked fourth with US$ 101.2 million in 2008. The Chinese are also funding many of the large scale infrastructure projects—notably the Hambantota Port under construction by the Chinese themselves.
Sri Lanka has provided an oil exploration block to China off the coast of Mannar.
Entrepreneurs from China have been given an exclusive export processing zone in Mirigama with the possibility providing more space at Godagama, Matara and the East.
Chinese investors who invest a minimum of US$ 25 million are given a Sri Lankan Passport on the basis of being a second home.
Trade between the two countries doubled over the last 5 years from US$ 660 million to US$ 1.13 billion, making China the second largest importer and the 13th largest export destination for Sri Lanka’s exports.
Attracting tourists from China is another area for potential growth. In 2000, tourist arrivals from China amounted to 2,208. In 2006 it increased to 15,274.
Dr. Kelegama said however, that Sri Lanka had played an important role in China’s economy as well.
In 1971 Sri Lanka co-sponsored a draft resolution which restored China’s legitimacy in the United Nations. It helped China gain acceptance to APTA in 1997 and the World Trade Organisation in 2000.
