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Political crisis affects Lankan economy
The unsettled political situation in Sri Lanka is adversely affecting the country's economy and investments. The political situation could delay the finalising of the Free Trade Agreement (FTA) with the US.

'The Sunday Times learns that Wal Mart, one of the largest companies in the apparel industry, which had opened an office in Colombo recently, had cancelled their visit due to the unsettled political situation.

Many investors have expressed concern and were carefully watching the situation while others have already cancelled their proposed visits. The consequences are; the IMF has delayed the release of US dollars 80 million (Rs. 7.5 billion) to Sri Lanka under its Poverty Reduction and Growth Fund. The start of the second Poverty Reduction Credit release by the World Bank for the first quarter has been held up.
Meanwhile, US Trade Representative Robert Zoellick has explained why the Bush Administration viewed Sri Lanka as a viable FTA partner.

The U.S. needs a "footprint" in South Asia, as it is the only region in the world where the US does not have an existing FTA partner, a State Dept. aide said. He also said Mr. Zoellick had pointed to Sri Lanka as having been supportive of the US at the failed World Trade Organisation ministerial in Cancun, and it had not joined the G-21 group of developing countries that have been blamed by Congress for causing the Cancun breakdown.

Sri Lanka appears ready to accept a yarn forward rule of origin for textiles that would require textiles made from either the US or Sri Lanka to be eligible for preferential access. Mr. Zoelick also said Sri Lanka was a much more viable partner in the region than India or Pakistan. He gave no indication as to when the Administration could make a formal announcement on negotiations with Sri Lanka.


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