Author: TELO Admin

Sri Lanka ranks 104th out of 125 developing and least developed countries (LDCs) in its implementation of trade facilitation measures over the last six years, a new study by Verité Research has found.

Alarmingly, 21 out of 35 LDCs have a higher rate of implementation than Sri Lanka, which has progressed only marginally from a rate of 29% in 2017 to 31.5% in June 2023.

Sri Lanka has also claimed to have less capacity than LDCs to implement trade facilitation measures. For example, the country has stated that it cannot implement over 69.3% of the trade facilitation measures without external assistance.

By contrast, developing countries and LDCs on average claim to require external assistance to implement only 21.7% and 40% of trade facilitation measures, respectively. Of the 125 LDCs and developing countries party to the World Trade Organisation’s Trade Facilitation Agreement (WTO TFA), only 10 countries (including Sri Lanka) have requested external assistance to implement over 69% of trade facilitation measures.

The study by Verité Research compared Sri Lanka’s progress in trade facilitation against its regional competitors, other developing countries, and least developed countries. Country-wise information published by the World Trade Organisation in its trade facilitation database was used for this comparison.

The database contains the commitments and notifications on the progress of the implementation of trade facilitation measures, by countries that are signatories to the WTO TFA.

Verité Research proposes three steps Sri Lanka can take to outperform LDCs and catch up with its peers. It also identifies 10 trade facilitation measures Sri Lanka can prioritise and implement without delay.

The first step is for Sri Lanka to take action to implement measures on its own, without delaying implementation by waiting for external assistance. For example, the country claims it cannot promptly publish information on trade procedures, taxes, fees etc., in a non-discriminatory and easily accessible manner, without external assistance.

However, 54% of the LDCs and 80% of the developing countries state that they have already implemented this, or can implement it on their own, without external assistance. This stance taken by Sri Lanka reflects poorly on the country and sends a negative signal to potential traders and investors.

The second step is to provide high-level leadership to overcome the resistance of government agencies to trade facilitation implementation and to influence the allocation of necessary resources to facilitate implementation. The National Trade Facilitation Committee (NTFC) of Sri Lanka, established to spearhead the implementation of trade facilitation measures, is co-chaired by the director general of Sri Lanka Customs and the director general of the Department of Commerce.

This is in stark contrast to countries like Vietnam, India, and Bangladesh, (all three have made better progress than Sri Lanka) where the NTFC is chaired by the deputy prime minister, cabinet secretary and minister of commerce, respectively.

The third step is the publication of the trade facilitation action plan and instituting a mechanism to monitor and report progress. For example, India has published its trade facilitation action plan online and has instituted a robust system to monitor its progress. As a result, the country has not only fully implemented all the trade facilitation measures included in WTO TFA, but is moving beyond WTO TFA by implementing additional measures to further facilitate trade.

Land connectivity is essential for the growth of ties between India and its neighbouring island, said the Sri Lankan envoy in India, pitching for connectivity projects resembling the “Channel tunnel” from the U.K. to Europe as a possible future initiative if environmental concerns are cleared.

Speaking about Sri Lankan President Ranil Wickremesinghe’s visit to India in July, where the two countries unveiled an “Economic Partnership Vision” statement that includes maritime, air, energy, trade and people-to-people connectivity, High Commissioner Milinda Moragoda said Sri Lanka’s hopes of benefiting from India’s economic growth and coming out of its current economic crisis hinged on being able to build causeways, bridges, pipelines, electricity transmission lines and landing infrastructure so as to increase travel to and from India.

“Building any causeway or highway across the streets will require environmental impact assessments, and there is a process for that”, Mr. Moragoda told The Hindu in an interview. “If Sri Lanka is looking at this idea of piggybacking on India’s growth story we have to have [land] connectivity,” he added.

13th Amendment

When asked why concerns expressed by India over implementation of the 13th amendment for devolution of power to Tamil majority areas was not, however, included in the joint statements made during the visit, the Sri Lankan envoy said President Wickremesinghe had discussed his latest proposals with Prime Minister Narendra Modi.

“Prime Minister [Mr. Modi] expressed his views and President [Mr. Wickremesinghe] expressed Sri Lanka’s position. So that conversation will continue,” said Mr. Moragoda, pointing out that eventually the resolution of the Tamils’ issue would have to be found “within Sri Lanka”.

The vision statement released after President Wickremesinghe met Mr. Modi in Delhi on July 21 refers to plans for a feasibility study on land connectivity “at an early date”.

“Both leaders have decided to establish land connectivity between Sri Lanka and India for developing land access to the ports of Trincomalee and Colombo, propelling economic growth and prosperity in both Sri Lanka and India, and further consolidating millennia-old relationship between the two countries,” it said. However, the envoy declined to comment on whether this would involve using the Ram Sethu, or the Adam’s Bridge that connects Tamil Nadu to Mannar Island, which has been the focus of protests by religious and environmental groups, in any way.

Private Investments

In addition, the envoy said that as Sri Lanka doesn’t have refining capabilities, an oil pipeline could help the island’s needs, especially if connected to the oil tank farms in Trincomalee which are also part of the MoUs signed during President Wickremesinghe’s visit. The projects agreed to during the visit most closely mirror a number of MoUs signed during Mr. Wickremesinghe’s previous visit in 2017, when he was Prime Minister under then Sri Lankan President Maithripala Sirisena. Those MoUs, including the plan for India to refurbish energy and port facilities in the eastern city of Trincomalee eventually did not make headway and were delayed due to internal political turmoil in Sri Lanka. When asked about timelines for the execution of the projects agreed to during this visit, Mr. Moragoda said the emphasis now is on encouraging private investments.

“When you talk of timelines for initiatives like this in democracies, it’s more complicated. One understanding between the two leaders is to try to encourage the private sector to be more engaged on both sides, which could be more time-sensitive and successful,” he explained. He added that the purpose of the Sri Lankan President’s visit, the first to India since he took over in June 2022, to “chart the way forward” for Sri Lanka’s economic recovery, as the economic vision statement had done, and to thank Mr. Modi and India for the support to Sri Lanka during its debt crisis.

In the past week, Colombo has received visits from French President Emmanuel Macron, Japanese Foreign Minister Yoshimasa Hayashi and an official from the Communist Party of China (CPC) Central Committee, all of whom also offered to help Sri Lanka as it works out a debt restructuring programme with the International Monetary Fund by the end of the year. Mr. Moragoda said economic revenue streams would have to be upgraded for a recovery, and hoped particularly for Indian investment and Indian tourists to contribute to that.