South Korea responds positively to SL’s call for enhanced dollar assistance

Sri Lanka has reached out to South Korea to obtain enhanced dollar assistance from its EXIM Bank and greater development assistance from KOICA, as the island nation continues to struggle with low levels of foreign exchange.

According to Sri Lanka’s Foreign Affairs Ministry, the response from South Korea was positive with the Republic of Korea Foreign Affairs Minister Chung Eui-Yong agreeing to the request put forward by Foreign Affairs Minister G.L. Peiris.

In the fresh round of discussions held in Seoul by the two ministers yesterday, the areas of trade and investment, political cooperation, defence initiatives, tourism and labour issues took the centre stage.

Prof. Peiris paid tribute to the multi-faceted relationship, which had developed between the two countries during their 44-year relationship and its present robust character. In addition to seeking assistance, the ministers reviewed what was acknowledged as the “very beneficial impact of South Korean development programmes” in Sri Lanka, especially in the fields of water management, waste disposal and secondary education.

Eui-yong said that to increase the commitment to Sri Lanka, his ministry will engage with the private sector to consider greater assistance in Sri Lanka, especially in the fields of computer technology, electronics and pharmaceutical products.

In return, Sri Lanka will set up a special investment zone for South Korea, which will be the revival of an initiative that was embarked upon previously.

The balance of trade between the two countries is significantly in South Korea’s favour. Exports into South Korea are approximately US $ 71 million, while imports into Sri Lanka are at the threshold of about US $ 192 million. Furthermore, the ministers agreed on exploring “practical ways” of overcoming some of the significant trade barriers, including customs levies on value-added products such as flavoured teas.

Sri Lanka sells down monetary gold as forex reserves drop

Sri Lanka has liquidated a part of its gold holdings in December 2020 to boost liquid foreign assets in line with a drop in annual foreign reserves holdings, Central Bank Governor Nivard Cabraal said even as year-end reserves were boosted with a swap from China.

The central bank is estimated to have sold about 3.6 tonnes out of a 6.69 tonne stock pile of gold (about 215,000 troy ounces) it had at the beginning of 2021, leaving it with around 3.0 to 3.1 tonnes of gold.

In 2020 also the central bank also sold 12.3 tonnes of gold after starting the year with 19.6 tonnes of gold.

The gold sales was to boost liquid reserves, Governor Cabraal said.

“When reserves reduce we reduce the gold holding,” Cabraal said. “We bought gold when foreign reserves were going up.

“Once the reserve levels increase over 5 billion US dollars CBSL will consider increasing the gold holdings.

Sri Lanka’s gross foreign reserves picked up to 3,137 million US dollars in December, after dropping to 1,588 million US dollars in November, though reserves are down from 5,665 million dollars at end of 2020.

It is the fourth year running that Sri Lanka has sold gold.

Sri Lanka started to buy gold aggressively when Governor Cabraal was running the agency in a previous term.

In 2009, Sri Lanka bought 15.8 tonnes of gold from the International Monetary Fund. After selling in 2010 and 2011, Cabraal bought 3.6 tonnes of gold in 2012 and 9.3 tonnes in 2014 as reserves recovered amid deflationary policy (sterilized purchases of forex).

However from 2014 September Sri Lanka’s monetary policy deteriorated with large liquidity injections made to target a call money rate, despite operating a peg and sharply less rule based policy being followed under ‘flexible’ inflation targeting and ‘flexible’ exchange rate.

Sri Lanka sold gold in 2015, 2018 and 2019 but did not buy any back as reserves fell in line with liquidity injections.

A central bank that targets an exchange rate cannot also control short term interest rates by printing money (inflationary policy), when economic activity (private credit in particular) recovers without selling a similar equivalent in dollars.

Sri Lanka started the current bout of inflationary policy around August 2019 re-purchasing bonds from the market (re-monetizing past deficits) when foreign reserves were 8.5 billion US dollars.

Such soft-pegs end up at the International Monetary Fund until laws to end the discretionary injections are brought or there is a shift to a clean floating regime.

SLFP Hints at Quitting SLPP-led Coalition

The SLFP hinted that it would be leaving the SLPP-led coalition and will contest all the upcoming elections through a new alliance. Senior Vice President of the SLFP, Prof. Rohana Lakshman Piyadasa stated that those in the SLPP, who charge that coalition governments had collapsed due to differences with coalition partners, would do well to study the historical context.

Prof. Piyadasa mentioned that a political rift had developed between the SLPP and the SLFP, which is the largest coalition partner in the alliance.

He explained that the SLFP was ready to contest all future national polls from a new political alliance and is of the view that without the 1.8 million votes pulled by the SLFP it would have been impossible for the current President to win the last Presidential Poll.

Speaking further, he said that all SLPP backbenchers should desist from pointing the finger at the SLFP and instead devote that time to resolving most of the pressing problems of the people.

He alleged that ahead of the formation of the present Government, the SLFP had consented to three agreements with the SLPP, but lamented the fact that the latter had failed to honour those agreements.

Prof. Piyadasa added that as promised the SLPP had reneged on its promise to hand over the requisite amount of Ministerial, State Ministerial and National List MP posts to the SLFP and charged that all those positions had been arbitrarily taken over by the SLPP.

He remarked that smaller parties, such as the Communist Party of Sri Lanka, the Lanka Sama Samaja Party (LSSP) and a few other coalition parties had suffered a similar predicament at the hands of the SLPP.

Meanwhile, the SLPP backbenchers have reportedly urged the party leadership to take a prompt decision regarding the present conduct of the SLFP, saying that each time political parties had signed pacts with the SLFP such parties had faced political ruination.

They have informed the SLPP leadership that the present Government had assumed power on the promise of prosecuting those responsible for the 2019 Easter Sunday terror attacks.

They had stated that in such a situation allowing SLFP leader Maithripala Sirisena to remain with the SLPP Government is questionable and they have urged the SLPP leaders to consider the situation deeply.

The backbenchers have also requested their leaders to take action regarding their own MPs who continue to direct virulent criticism at the Government, while enjoying perks and privileges, before things could get out of hand.

They have also decided to discuss these urgent matters more seriously during the next fortnight with a planned meeting with the President and the PM and this was revealed by SLPP MP Pramitha Bandara Tennakoon and confirmed by SLPP General Secretary MP Sagara Kariyawasam.

Several Tamil leaders have signed the document to Modi –TELO Leader Selvam

Selvam Adaikalanathan, Member of Parliamentarian and leader of the Tamil Eelam Liberation Organisation (TELO), said leaders of several political parties had signed the document to be sent to the Indian prime minister.‎

He said that he signed a document along with Tamil National Allaince leader, R. Sambanthan, Tamil People’s National Alliance leader, C. V. Vigneswaran, Eelam People’s Revolutionary Liberation Front leader (EPRLF), Suresh Premachandiran, Tamil National Party leader, N. Sri Kaantha, and People’s Liberation Organisation of Tamil Eeelam (PLOTE) leader, Tharmalingam Sitharthan.

The leader of Tamil Progressive Alliance (TPA), Mano Ganesan and the leader of Sri Lanka Muslim Congress, Rauf Hakeem have said to provide support from outside, Selvam Adaikalanathan further said.

It is understood that Illankai Tamil Arasu Kachchi (ITAK) leader Maavai Senathirajah will also be signing the document on 7th January.

Lankan dollar salary earners face forcible conversions by banks

A state of confusion appears to have been created by the instructions issued to banks by the Central Bank with regard to conversion of bank balances of resident Sri Lankans who earn in dollars and Lankan migrant workers who remit money to their foreign currency bank accounts.

Some claim that balances in their foreign currency accounts are being forcibly converted into Sri Lankan rupees by banks citing the new conversion rules are ordered by the Central Bank.

They say some banks have resorted to convert the balances in their foreign currency accounts upon seeking their consent, while others have done so without prior notice.

While the people who receive income in foreign currency expressed their dismay over this practice, some irate migrant workers have said they wouldn’t send back money hereafter except for a bear minimum, until the authorities scrap the new conversion rules.

Meanwhile the Central Bank Governor, Ajith Nivard Cabraal who took to Twitter to respond to such claims categorically denied them, calling them both, “rumours”, and “total false”.

“Rumors spread by some mischievous elements that Sri Lankan #banks have been ordered by @CBSL to forcibly convert balances in their customers’ #Forex accounts are totally false. #SriLanka #Fakenews,” he said yesterday.
The extraordinary gazette notification issued on October 28 titled ‘Repatriation of Export Proceeds into Sri Lanka’, covered the services receipts including, “professional/ vocational, occupational, and business services provided to persons resident outside Sri Lanka by persons resident in Sri Lanka”.

It also said the residual amounts of such services income receipts, after meeting several allowable expenses and commitments up to a month are subjected to conversion into Sri Lankan rupees on the 7th day of the following month.

However, “these rules do not apply to inward remittances (worker remittances) to the country by Sri Lankans working abroad,” an explanatory note issued by the Central Bank subsequent to the circular said.

Hence, it begs the question as to how some of the migrant workers, who repatriate their foreign currency earnings,were subjected to these conversion rules as claimed by them.

Further, “proceeds received by non-residents to the accounts maintained in the Offshore Banking Unit solely for collection purposes, where exports are not originating from Sri Lanka, are also not subject to these rules,” the gazette stated.

If instructions from customers were not received by the 7th day of next month for conversion, “banks are required to convert export proceeds by the due date in the absence of documentary evidence from the exporter.”

In December last year, the Bar Association of Sri Lanka filed a writ petition at the Court of Appeal, challenging this rule which gives powers to convert professional fees received in foreign currency.

India will support Sri Lanka in these difficult times: Jaishankar

India on Thursday (6) assured Sri Lanka of its support to tide over “difficult times”.

India also welcomed the Trincomalee tank farms project saying it will augment bilateral energy security.

After a phone conversation with his Sri Lankan counterpart Professor G. L. Peiris, Indian External Affairs Minister S. Jaishankar said India will support Sri Lanka in “these difficult times”.

“Greeted FM G.L. Peiris of Sri Lanka in the New Year. A reliable friend, India will support Sri Lanka in these difficult times. Agreed to remain in close touch,” Jaishankar tweeted.

 

Indian External Affairs Ministry Spokesperson Arindam Bagchi, when asked on the possibility of India extending the credit line to help Sri Lanka overcome its economic crisis, said it has always stood by the people of that country.

On the fishermen issue, Bagchi said that the Indian High Commission in Colombo has been making efforts to ensure the early release of the remaining Indian fishermen detained by Sri Lankan authorities last month.

Sri Lanka had detained a total of 68 fishermen and 10 boats, and 12 of these fishermen have already been released, and the India High Commission is working on the release of the rest, said the spokesperson.

He said both sides are in consultation for the early holding of a meeting of the joint working group on fisheries.

On Sri Lanka’s Cabinet approving the deal to jointly develop the Trincomalee oil tank farm with India, Bagchi said it will boost bilateral energy cooperation.

“We have seen reports that the Sri Lankan Cabinet has approved the development of the Trincomalee tank farms. Energy security is an important area of our bilateral cooperation with Sri Lanka,” he said.

“We are in consultation with the Government of Sri Lanka for the modernization of the Trincomalee tank farms. This will allow for the storage of fuel and will augment bilateral energy security,” Bagchi added.

The agreements to develop Trinco Oil Tank Farm were signed on Thursday (6), said Energy Ministry Udaya Gammanpila.

The Office of the Minister of Energy in a statement late Thursday (6) said that a majority of the tanks at the Trinco Oil Tank Farm which were under Lanka IOC will now be under the Ceylon Petroleum Corporation as a development project.

On the query on extending the credit line by India, Bagchi referred to the visit to New Delhi by Sri Lankan Finance Minister Basil Rajapaksa last month.

“He briefed the Indian side on the economic situation in Sri Lanka and his government’s approach in addressing these challenges. India has always stood by the Sri Lankan people and Sri Lanka is an important part of our neighborhood first policy,” he said.

He said during Rajapaksa’s visit, discussions took place on deepening cooperation in areas of food and health security, energy security, the balance of payment issues, and Indian investments in Sri Lanka among others.

“I understand that further consultations are ongoing,” Bagchi said.

Banks in India cautious in dealing with Sri Lanka because of Forex issue

As Sri Lanka grapples with a severe foreign exchange crunch, high street banks in India have turned cautious and selective about their exposures to the island nation.

Several institutions have reduced discounting letters of credit (LC) – the basic instrument for financing trade – issued by many Lanka lenders while others are giving credit to exporters based on the standing of the party, amount, the tenor of the credit, and standing of the bank issuing LCs.

Given the long trade relations, Sri Lanka’s dependence on imports and expectations of credit lines (from India and other countries), and possible currency arrangements, bankers hope that the country would be able to tide over the crisis in the medium term.

At the beginning of December, Sri Lanka’s forex reserves were just enough for a month of imports.

“We have not put a complete embargo on discounting export bills to Sri Lanka. It’s done on the basis of limits available with LC issuing banks,” said a senior official of the State Bank of India, the country’s largest lender.

Among other large banks, HDFC Bank was going slow on handling LCs for exports to Sri Lanka, Axis that has financed many Indian companies with exports to Sri Lanka is being selective, while ICICI Bank has cut limits for Sri Lanka along with some of the other smaller countries for quite some time now. IndusInd, said an official of the bank, is closely monitoring the developments and has been selective in the transactions undertaken.

“There is nothing wrong with banks in Sri Lanka. But when the payment falls due, there may not be enough dollars available in the forex market there,” said a banker.

India’s total exports to Sri Lanka was $3.2 billion in 2020. Oil, ships, boats, pharmaceutical products, sugar, iron and steel, cotton and machinery are among the top export items.

Under the normal trade finance arrangement, an exporter is paid by its bank which discounts the bill after documents like shipping bills, commercial invoices, and bills of lading are submitted to the bank. The bank is paid after a certain time – the credit period which could be up to six months (or a year or more for capital goods) – by the importer’s (here, the Sri Lankan buyer’s) bank.

Banks discounting bills have turned edgy as Sri Lanka is starved of dollars and the Sri Lankan central bank may not be in a position to supply dollars when importers’ banks have to make payments to exporters’ banks in India.

Payments against sight bills, where (under normal circumstances) funds are transferred within five working days, are taking more than a month, said an official with a leading export promotion organisation. Some exporters, said an official of a consumer goods company, are giving 6 to 7-month lines of credit to distributors who undertake exports to Sri Lanka.

Though large MNC banks like HSBC, Citi, and Standard Chartered, which have a long presence in Sri Lanka, continue to extend trade finance with certain precautions, they have the comfort of dealing with their respective Lanka office as the counterparty.

“Some banks are simply not giving any credit, but are simply operating on a collection basis. They are releasing money only after receiving it from the bank in Sri Lanka,” said a mid-sized exporter.

Banks as well as Indian exporters are awaiting the $1.5 billion line of credit. Of this, it is understood that a $500 million line would be issued by Exim Bank of India to Sri Lanka very soon. “Negotiations are on between India and Sri Lanka over how the money would be used. In all likelihood, the use could be restricted to import of oil and other essentials by Lanka,” said a banker. Exim Bank has so far extended 11 credit lines to Sri Lanka aggregating to over $2.12 billion.

Since tourism – which suffered badly after the Easter terror attack and the Covid-19 pandemic – has been the prime source of hard currency for Sri Lanka, banking circles think the country may have to enter into other arrangements if a balance of payment problem persists. “Maybe, the kind of deal that exists between India and Nepal. If tourists from India can spend the Indian rupee in Sri Lanka, it would ensure a supply of rupees that could be used to buy stuff from India. But this may have central banking and regulatory implications and can be put in place only after the pandemic is over and travel restrictions are lifted,” said another person. (Courtesy Economic Times)

SJB Challenges Government To Conduct PC Election: “Public Cannot Be Hoodwinked By Relief Package”

The Samagi Jana Balawegaya today challenged the government to conduct the Provincial Council election.

Addressing a press conference in Colombo, SJB General Secretary Ranjith Madduma Bandara said the govenrment could not hoodwink the public by giving a relief package.

He said the SJB would take the first step in forming a new government at the Provincial Council election.

The PC election has been delayed indefinitely until the report of the Parliamentary Select Commitee (PSC) on electoral reforms.

People’s Bank to pay USD 6.9 million to Chinese fertilizer company today

The People’s Bank has decided to pay USD 6.9 million to the Chinese company that shipped a much-disputed consignment of organic fertilizer to Sri Lanka.

The decision was taken after the Colombo Commercial High Court dissolved the enjoining order preventing the payment on Letter of Credit to China-based Qingdao Seawin Biotech Group Co., Ltd.

On January 03, the enjoining order in question was dismissed as all parties had agreed for a settlement to ship a new stock of standardized fertilizer although the controversial organic fertilizer shipment was not accepted by the island nation.

As per reports, the People’s Bank is expected to make the payment to the Chinese fertilizer firm later today.

Last year, the Ceylon Fertilizer Company (CFC) had secured two enjoining orders from the Colombo Commercial High Court against Seawin Biotech, its local agent and the state-run People’s Bank, preventing the payment on Letter of Credit.

The first court order against the Chinese firm in question was secured on October 23, blocking the People’s Bank from making any payment under a Letter of Credit opened in favour of the Chinese company.

During a previous court proceeding, Additional Solicitor General Susantha Balapatabendi, who appeared on behalf of the CFC, told the judge bench that the Seawin Biotech had shipped a fertilizer consignment, which is a partial shipment worth more than a billion rupees that was procured through a tender process initiated by the Agriculture Ministry.

Although the said Chinese firm was required to ship sterile organic fertilizer under the tender contract, it had admitted in its shipping advice that the consignment may contain microorganisms, he had further told the court.

The National Plant Quarantine Services (NPQS), which tested the sample sent to them, had confirmed the presence of organisms, including certain types of harmful bacteria, the Additional Solicitor General had said, adding that, in this context, the Chinese firm in question had failed to complete the accepted terms of the tender.

As per the terms of the contracts, the payment for the controversial organic fertilizer shipment was slated to be made through a Letter of Credit established via the People’s Bank.

However, on December 14, the Sri Lankan government said it has decided to pay USD 6.7 million to the Chinese fertilizer company, on the advice of the Attorney General’s Department.

According to Agriculture Minister Mahindananda Aluthgamage, the payment includes the cash deposit of USD 5 million placed by the company.

SL simply can’t continue asking for financial assistance from China -Palitha Kohona

Sri Lankan ambassador to Beijing Dr. Palitha Kohona speaks to Daily Mirror regarding the present status of Sino-Lanka bilateral relations in the event of fertilizer crisis involving Chinese company Seawin Biotech which even threatened to complain against Sri Lankan state banks to the international rating agencies. The Excerpts:

Q As Sri Lankan ambassador to China, how do you view the bilateral relations in the context of the fertilizer crisis?

Our bilateral relationship is multi-dimensional. It is not dependent on one single factor or even a range of minor factors. There could be ups and downs. That could happen in any relationship whether it is personal or international. There are misunderstandings. There are issues that come up unexpectedly .The most important thing is to address them to the satisfaction of both the parties. I personally believe the fertilizer incident has been addressed. We are back on track. Hopefully, we will not have a similar situation again. Or even if something like that crops up again as it possibly might, we should be able to deal with them as two mature countries without getting carried away unnecessarily. Especially in commercial dealings, issues arise. That is why we have arbitration provisions in commercial agreements and mediation. We have the possibility of accessing to legal system, to the courts of law. All that is there because we anticipate disagreements and misunderstandings. I am sure that, given the nature of our relationship, we are capable of dealing with situations of this nature adequately to the satisfaction of both the countries.

Q But the Chinese company said that it would lodge a complaint to the international rating agencies against Sri Lanka’s state banks. How would it affect bilateral relationship?

According to information which I have received, the matter has been addressed and resolved. I have no access as to what the media is reporting and the background to it.

“We need to realize Sri Lanka is a country that cannot remain a poor third world country forever. All around us, countries are steaming ahead us. Even Bangladesh, which in 1971 was described as a basket case, is in a position today to assist Sri Lanka financially because they have taken a pragmatic approach to the world. Of course, when investors come in, we need to be careful how we manage them”

Q In which manner has it been addressed?

I must repeat that I don’t think I should go into details. Nothing has been publicly announced. I believe we should leave it at that. By stirring the pot, I don’t think we are going to get any satisfaction for either side.

Q In Sri Lanka, we notice a difference in Chinese approach to bilateral relations. The Chinese reach out to the north and seek to invest there. They remain engaged with the opposition. They made a donation to the opposition leader to carry out his Covid-related charity work. How do you see this approach as the Sri Lankan ambassador in Beijing?

This is quite normal as any ambassador who represents his own country overseas. He does not represent his country only with the ruling party. Especially in a democracy like ours, it is quite possible, conceivable that opposition would come into power at one point or the other. It happened in 2015. It is quite normal for a diplomatic mission to maintain good relations not only with the government but also with the opposition parties as well. You see this with western embassies. They engage with a whole range of political entities, the entire spectrum in fact. It is very common for ambassadors, political officers and other diplomats to deal constantly not only with the government officials, entities but also with the entities representing other political, social and religious viewpoints etc. I think it is a very good thing that the Chinese ambassador made a visit to the north. Everyone saw the photograph of him entering Nallur temple discarding his shirt. It is good that Chinese are reaching out to our main minority and also establishing good links with them.

Q China and Sri Lanka could not carry out a lot of activities because of the pandemic. The pandemic situation has eased a bit now. How do you intend to carry out bilateral activities?

The pandemic situation has been contained to some extent in Sri Lanka. In China, they have a very rigid policy. The country remains closed. No Chinese nationals are allowed to travel outside other than for specific purposes. Tourism does not exist anymore. No foreigners are allowed into the country other than going through very rigid entry controls. As far as China is concerned, although they are probably the safest country on the earth at the moment, the movement in and out of the country is strictly controlled. I don’t see the possibility of normal travel being restored between the two nations. As you know, we are expecting a visit by the Foreign Minister of China to Sri Lanka early January. As the embassy, we are hoping that we could arrange more visits of that nature. Bilateral visits are very important. For the last couple of years, no leader other than Wang Yi and Yang Jiechi , has visited Sri Lanka. No Sri Lankan leader has visited China. We would like to see high level visits resume. But again, it all depends on how the pandemic is controlled by both sides. China is particularly sensitive about the pandemic situation here. In Xian, the number of cases were detected over the last few days. The city was kept under lockdown. Here they maintain very strict control. If there is any slightest indication of cases occurring, they introduce very rigid controls. Other than that, China remains largely free of the virus. It is a good sign. This is a country with 1.4 billion people. The Chinese authorities have taken the view that it is very important to control the infections to the strictest extent possible.

“This is quite normal as any ambassador who represents his own country overseas. He does not represent his country only with the ruling party. Especially in a democracy like ours, it is quite possible, conceivable that opposition would come into power at one point or the other. It happened in 2015. It is quite normal for a diplomatic mission to maintain good relations not only with the government but also with the opposition parties as well”

Q How would it affect the investments?

That is a very important question. Over the last 12 months, we have been talking to a large number of Chinese companies. Many have expressed interest in the potential Sri Lanka has. I know that two big companies have sent their representatives to Sri Lanka. Power China is one. KY Electric is another. Power China is interested in building residential units in Colombo and outside. KY Electric is interested in renewable energy. We held talks with China Harbour, China Great Wall, Power Steel, etc. These are only a few of them. All of them have shown keen interest in investing in Sri Lanka catering not only to the domestic market but also to the wider regional markets. We have been encouraging them. One of the reasons for nothing tangible to be eventuated so far is the inability to send their specialists to Sri Lanka to assess the situation at ground levels. Once travel is restored to some extent, we can expect many of these companies to show greater interest in Sri Lanka. We have also encouraged travel companies to invest in Sri Lanka. One company with a client base of over 40 million is interested in developing resorts in Sri Lanka, like the resorts in southern Europe or Hainan Island. We can expect it once things return to some sort of normalcy. Many other companies will make a beeline to Sri Lanka. Sri Lanka has now got a stable government. It has easy access to the regional markets. It is not an insignificant regional market whether we are looking at Africa, the Middle-East, India, Pakistan, South-East Asia, and Australia. Then of course, we have been talking to everyone about the investor-friendly policies adopted by the government. Everyone knows Sri Lanka is a friendly country at political level. This creates a level of confidence. I think it is very important for investors, mostly the type of investors we are talking about. Some of them are in the global Fortune 500. It would be good for Sri Lanka to have some of those investors. They may also work as catalysts for investors from elsewhere, whether they are from the United States, Europe, Russia, Australia, Japan and Korea. The line we have been focusing is to encourage some of the big names to invest in Sri Lanka. That will operate as an incentive or a bait for other companies from around the world to come.

Q What are the investments lined up as far as Colombo Port City is concerned?

A very serious offer has been made by Power China and China Harbour. It is quite likely that over the next few months, they will invest substantial amounts in the port city. Again, this will be a flagship investment which will hopefully be an attraction to others to follow-suit. We are hopeful that companies from India, Europe and the United States will follow these big investments in the financial centre and the marina and in the convention centre. Our expectation is that once the Chinese companies move in, the others will find it difficult not to move in simply to maintain their presence in Sri Lanka and in the region.

“A very serious offer has been made by Power China and China Harbour. It is quite likely that over the next few months, they will invest substantial amounts in the port city. Again, this will be a flagship investment which will hopefully be an attraction to others to follow-suit. We are hopeful that companies from India, Europe and the United States will follow these big investments in the financial centre and the marina and in the convention centre”

Q There is an argument by some parties that Chinese presence in Sri Lanka is too much. How do you see this?

My job is to promote Chinese investments in Sri Lanka. Sri Lanka needs investments. We can get into this type of arguments. For 300 years, we had colonial occupation of the country. We need to be a little more rational. Investments are investments whether they are Chinese, Indian or European. The Europeans occupied us, controlled us and dominated us for three centuries. This continues to dominate our financial systems. I think we need to realize Sri Lanka is a country that cannot remain a poor third world country forever. All around us, countries are steaming ahead us. Even Bangladesh, which in 1971 was described as a basket case, is in a position today to assist Sri Lanka financially because they have taken a pragmatic approach to the world. Of course, when investors come in, we need to be careful how we manage them. Not every investor should be encouraged to come to Sri Lanka. We should decide what is best for us and what will be better for our future, children. Our children need opportunities. I don’t see any pride when people proudly say that 1.4 million of our youth are driving tuk-tuks. We need to get out of that mentality and provide opportunities for our young people to do better in life. To do that, we need investments.

Q What kind of cooperation is in store for Sri Lanka to get over the foreign exchange crisis?

China has helped us a great deal in the current situation. It approved a swap arrangement amounting to 10 billion RMB. It is roughly over US$ 1.5 billion. Earlier, China made available to us funds through China Development Bank, Asian Infrastructure Investment Bank (AIIB). China has been doing its bit to help us as much as possible. We need to be conscious of that. If not for these Chinese funds, we would have been in a deeper mess now. Of course, there are circumstances which are beyond our control. Nobody expected the pandemic to affect us in this manner. Our tourism crashed. That was a major source of foreign exchange for us. Our remittances from expatriate workers also shrunk substantially. Traditional markets for our exports were affected. Hopefully, the pandemic will ease up. Our exports, tourism and remittances will recover. In the meantime, we need to cope up with the problems. We are confronting problems such as repayment of loans and interest repayment. China has been more than willing to come to our help. In addition to findings that have been made available, they gifted three million doses of Sinopharm vaccines, and another 23 million doses were provided at very low, concessionary rates.

Now, one of the main areas we are focusing is to increase Sri Lanka’s exports to China. We are not exporting enough considering that the nature of our relationship is very close. In 2020, we managed to export only US$ 280 million worth of goods whereas China exported US$ 4 billion worth of goods. Our performance is weak compared to performance of countries like Pakistan, Bangladesh and even Nepal. We cannot even fall in the same league as Malaysia, Singapore or Vietnam. They export huge quantities of agricultural, fishery and industrial products to the Chinese market. We have been working towards increasing our exports. It is essential. We just cannot continuously look for financial assistance.

“Over the last 12 months, we have been talking to a large number of Chinese companies. Many have expressed interest in the potential Sri Lanka has. I know that two big companies have sent their representatives to Sri Lanka. Power China is one. KY Electric is another. Power China is interested in building residential units in Colombo and outside. KY Electric is interested in renewable energy. We held talks with China Harbour, China Great Wall, Power Steel, etc. These are only a few of them. All of them have shown keen interest in investing in Sri Lanka”

One of the suggestions made is that we need to resume our negotiations on the Free Trade Agreement (FTA) or an early harvest agreement. This was the approach taken by Pakistan, Bangladesh. They went for early harvest agreements. As a result today, Pakistan exports even Basmati rice and mangoes. ASEAN countries have FTAs with China. Shops are full of exports from ASEAN countries including young coconuts, pineapples, Durians and Rambutans. There are other high value items. We need to take this very seriously. We are working on this at the embassy. Of course, we need the necessary support from Colombo. Colombo needs to take the bull by the horns and resume negotiations on the FTA, or at least negotiate an early harvest agreement. Any agreement depends on how we negotiate. This is the most lucrative market in the world. Chinese are spending money in a crazy manner. They are buying up everything. I did a live streaming show for Sri Lankan tea and coconut products. The goods we had on sale were sold within 30 seconds after I came on the screen. In China, there is a great demand for Sri Lankan high quality black tea, especially if they are packed attractively with geographical indication. At the moment, we export tea work US$ 57 million. We can easily bump it up to over US$ 100 million in very quick time. Then, there are coconut products such as coconut water. King coconut is a product with a huge market in this country (China). We can expand it very, very quickly. We are trying to gain a wider range of seafood products. We have succeeded in 29 varieties of fishery products. We will work on more varieties of seafood.

The Chinese market for high quality readymade garments is expanding. We need to expand on that. I have suggested that the Joint Apparel Industry locate an officer in Beijing to pursue this market on their behalf. We need someone to concentrate on this market alone. We need to work on the Chinese tourism market. When the doors open, I am confident that Sri Lanka will be a prime destination for them. In 2019, 169 million Chinese travelled overseas. We need to get a small fraction of them to help us.

Q Geopolitical rivalry involving China, India, the USA and Japan play out in Sri Lanka. How can we strike a balance while maintaining good relations with all?

This is not something new to Sri Lanka. Even in 1950s, 1960s and 1970s, there were cold wars. We maintained a non-aligned stance. Both sides respected us. We did not give away bits and pieces of sovereign territory to keep this rivalry at bay. We just managed that relation well. We benefitted from it also. It can be done. It must be done in the future. Sri Lanka is a sovereign nation. We went through horrendous internal conflicts. We maintained our territorial integrity. We should treasure what we sacrificed for so much. We should go forward keeping that mind.