Sell more to Asia, urges Pathfinder Foundation

The shift of the centre of gravity of the global economy to the East (Asia) is likely to be accelerated in the post-COVID-19 world, says a local think-tank, adding that in this context “Sri Lanka should sell more (goods and services) to Asia.” 
“At present, over 50 per cent of Sri Lanka’s exports are to the EU and US.  More needs to be sold to Asia.  In addition, the export basket needs to be more diversified and complex. Trade agreements provide access to markets, investment and know-how which can catalyse the diversification of both export markets and the product mix,” according to a Pathfinder Foundation Study Group report on a new economic vision for post-COVID-19 Sri Lanka.
The report has been shared with the key leaders of the government. 
The report said that the Doha Round of Multilateral Trade Negotiations is at an impasse. It has probably been dealt a fatal blow with the disengagement of the current US administration from the WTO. Many countries have responded by pursuing bilateral, regional and plurilateral trade agreements to boost their growth and employment prospects.  Sri Lanka has fallen behind and is confronted with the possibility of falling even further behind. 
“The Sri Lankan authorities have done well to stabilize the external position of the country despite the extreme shock delivered by the pandemic to Sri Lanka’s key sources of foreign exchange: Remittances, apparel exports, tourism receipts, earnings from shipping, FDI inflows, foreign institutional investment in government securities and the stock market, as well as the prospects of raising money from international capital markets. However, the temporary import bans and the decline in oil prices have served to mitigate the worst effects of these adverse trends.  The effectiveness of these measures is reflected in the forex market, where the rupee has been largely stable after its initial sharp depreciation to Rs.199: per 1 USD.  It has now stabilized around Rs. 186,” the report said.  
However, the economy is in a sub-optimal equilibrium as far as growth and employment prospects are concerned.  There have been some green shoots of recovery in exports of apparel, seafood, tea and some rubber products.  However, this is far from sufficient to support the country’s ambitions on growth and employment. For this to happen, Sri Lanka has to work towards a transformation of its export and FDI performance. This has proved elusive so far. The measures needed to achieve this are well known.  They must now be implemented effectively and trade agreements need to be an integral part of this effort, the report said.  
The Pathfinder Foundation recommends that Sri Lanka:
1. Sell more to Asia, the most dynamic region and the part of the world which is recovering most quickly from the effects of the pandemic, and 
2. Enlarge preferential market access to attract FDI to promote export growth.  
An urgent priority therefore is to revive and accelerate the negotiation of a partnership agreement with China; an expanded agreement with India; and an agreement with Thailand. Agreements with other Asian countries, particularly other ASEAN members and Japan, should also be explored.  Another goal should be maximizing the benefits from the Agreement with Singapore.  
In addition, the UK remains an important trading partner.  Brexit negotiations have recommenced. At the same time, the UK is negotiating trade deals with non-EU countries. It is important that Sri Lanka negotiates an early trade deal with the UK which sets the GSP + preferences as the minimum.  
3. In order to accelerate these processes, it is important that an empowered and technocratically competent high-level trade negotiating team is appointed reporting directly to the highest level of government.