Bilateral Free Trade Agreements: Are we on the Right Track? 0 740

The process of Sri Lankan policy reforms of liberalisation since 1977 has been predominantly unilateral. These reforms were undertaken in a global context of multilateral trade and tariff reforms under the guidance of international organizations like GATT and WTO. In addition, Sri Lanka joined in the efforts of liberalisation at regional level, e.g. the South Asia Free Trade Agreement (SAFTA) under SAARC initiatives. Multilateral and even regional trade negotiations however, have proved very slow and cumbersome. Bilateral and preferential trade agreements have become attractive globally, as well as in Sri Lanka.

The first experience of post-independence Sri Lanka in bilateral trade agreements was the well-known Rubber-Rice Pact of 1951 between Sri Lanka (then Ceylon) and the People’s Republic of China. It was a simple bilateral bartering agreement which provided a win-win solution to the two participating countries. The recent Sri Lankan interest in pursuing bilateral and preferential trade agreements can be traced to the 1990s. Three FTAs have been signed and implemented since then. The India-Sri Lanka Free Trade Agreement (ISFTA) was signed in 1998 and entered into force in March 2000. The Pakistan-Sri Lanka Free Trade Agreement (PSLFTA) came into force in June 2005. The Sri Lanka Singapore Free Trade Agreement (SLSFTA) was signed and made effective in 2018.

The ISFTA and PSLFTA are simple agreements covering the trade of goods between the respective partner countries. The SLSFTA in contrast, is a comprehensive agreement covering trade in goods, sanitary and phy-to-sanitary measures, and technical barriers to trade, customs procedures and trade facilitation, trade in services, telecommunications, E-commerce, government procurement, foreign investment, competition, intellectual property rights, transparency rules and matters of economic and technical cooperation. Sri Lanka may choose to negotiate its future FTAs in the same format as that of the SLSFTA. The new FTAs would then be comprehensive/deep agreements. Such ‘deep’ FTAs influence border-related policies as well as beyond-the-border policies. Liberalization through bilateral FTAs is being given priority with multiple objectives.

Several issues must be raised on this declared approach of expanding the policy scope of FTAs. A fundamental issue is that FTAs, particularly comprehensive FTAs, restrict the policy autonomy of the government to a significant extent. In today’s global institutional and organizational structure the policy autonomy of a small country is no doubt extremely limited. It may be for good reasons that the policy makers in Sri Lanka opt to get their policy autonomy further constrained by a series of FTAs. Here the opinion makers in the country seem to demand the following. The reasons for signing an FTA ought to be transparently shared with the public. Adequate research ought to be conducted to establish that any envisaged FTA would generate net positive benefits to Sri Lanka. Further the feasibility of the envisaged FTA should be carefully examined without rushing into signing. The planned FTAs are to be signed with countries with greater experience and equipped with better institutions. If adequate care is not taken, the signing of an FTA could produce extensive adverse effects on the country’s development efforts.

”From an overall point of view, Sri Lanka, as it stands today, is in an extremely weak competitive position in the global economic set up”

There are many needed domestic economic reforms. Some of these could lead to further liberalization. At the same time, there could also be critical intervention by the state in some fields. Before envisaging any more FTAs, priority must be accorded to domestic policy reforms based on a coherent national development framework and a widely-accepted national foreign trade policy.

There is another danger in the current declared policy of moving toward two more FTAs and a comprehensive agreement with India, in addition to the three FTAs currently in force. FTAs are not the best way to improve Sri Lanka’s competitiveness or productivity which is constrained by various structural and institutional factors. None of these factors can be resolved by entering into FTAs. In addition, operating a number of FTAs with different countries, involving multiple Rules of Origin, can make the foreign trade system extremely complicated, distorted and cumbersome.

Sri Lanka does not yet have a firmly established institutionalised procedure within which international trade agreements, particularly those so-called comprehensive agreements, can be negotiated and implemented. Strong legal, regulatory and institutional frameworks are needed if the national interest is to be safeguarded in the process of negotiation and implementation of bilateral preferential FTAs. Entered into without due care, bilateral trade agreements could turn out to be, in the long run, contractual traps with obligations, without worthwhile advantages to gain.

BY: ECONSULT

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“Made in Sri Lanka” 0 1495

Ever watch the movie, Rocky? I mean, any of those would suffice. But mainly, the original. In fact, if you know anything about Stallone’s life itself, you’ll know that he’s probably one of the biggest success stories in history. Now, there are plenty of famous people who failed but never gave up on their dreams. You can find them all throughout history. There sagas are powerful enough to make you second guess ever giving up in life.

Does the common idea of geniuses having an eccentric ideas and behaviors bear any truth? Here is a story of eccentric entrepreneur for you to decide.

People waste searching endlessly for magic, whereas to Lawrence Perera life itself is a magic. “I didn’t grow up around incredible cars or at a time where there was luxury. Few of my earliest and fondest memories involve automobiles. My story begins as kid who broke every toy car received just so that I could see how it was made. My mother noticed my passion for cars and decided that I should get into automobile engineering field and made me enter the German tech without waiting to go to the university, she was keen to see me making a career in the automobile industry’’ says Dr. Lawrence with a sense of gratitude, by starting his conversation with BiZnomics. “Just as we have moments in time crystallized by places, music or movies that imprint upon us, the automobile left an indelible impression on my experience and who I became”.

Now an Automobile Engineer by profession with over 40 years’ experience in the Automobile Engineering Industry both locally and overseas, Dr.Perera is a diploma holder in Automobile Engineering at the CGTTI, and Institute of Motor Industry of UK. He is also a certified automobile engineer in the Institute of Motor Industry and a fellow member of the Institute of Motor Industry – UK (FIMI).

‘’I know from very hard won experience that start-ups are enormously difficult and risky and chances are you might not succeed” says Dr. Lawrence Perera, Leading entrepreneur, Chairman and CEO of Micro Holdings and Micro Cars Ltd. Dr. Lawrence’s “ hard won experience’’ is based on manufacturing the car “Micro” the first designed , developed and manufactured car in Sri Lanka.

He has received extensive training with BMW, Volkswagen – Germany and Peugeot – France. Dr. Perera described his daily sightings of stranded people on the roads due to the chaotic situation of public transport and realized the crying need for a reliable alternative. ‘’I thought that if people had a reliable, economical, decent, comfortable and affordable car that would take them to the place they want to go, the problem would be solved and many man-hours would be saved. I then set to design and develop a small car with every household in mind – and that’s where MICRO started’’ he said.

Describing his product further he states: ‘’It was the tuk-tuk that influenced me to create a small car. The Morris Minor was the smallest at the time and the dimensions of my drawing were smaller. My product which was patented in 1999 was an 80% local manufacture. As far the brand name, I decided on micro mini and finally named it MICRO’’.

Dr. Lawrence Perera had been skeptical of the success of his product at the time it was launched at the price of LKR 300,000. ‘’ At that time local products were thought to be inferior but MICRO turned out to be acceptable and most bought it because it was economically priced’’. Marketing local brands had been very competitive as it was difficult to challenge and compete with international giants in the market.

The Micro was fitted with safety standards such as air bags and seat belts. Yet, Lawrence had to stop production mainly due to complicated manufacturing process and cost of production increasing.

The garment industry in Sri Lanka has made a big contribution to change people’s mentality in buying ‘made in Sri Lanka goods’. Garments sewn in Sri Lanka have earned in international reputation and Sri Lankan consumers are well aware of this fact. The government should encourage local products, and especially an industry such as automobile requires a certain tax relief for composite material used for making cars. Adding to this, He criticizes the industrial policy and taxation systems prevailing as not being friendly and conducive to local industrialist and manufactures. The Micro brand of which Sri Lanka could be proud of became well known the world over, even in countries such as Germany, China and Korea. But I could not develop Micro because support for the automobile industry is almost zero. For one thing vehicle importers were against local manufacture since their imports business would take a downward turn. And next, the industrial policy of the country and the taxation system does not provide any impetus at all. Although a normal car is not a luxury, but a necessity”. He claims that during the last four years, the company run with losses, and that the financing aspect has been terrible. The bank loan interest rate has shot up from 6.5% to 14.5%. p.a. “Business has been thrown into a quagmire”, he says and adds, “We have to pay much more than we earn”

Dr. Lawrence opines, that Sri Lanka has been in a miasma of uncertainty for a while, and that the combined effects of numerous policy changes have thrown many enterprises including the motor vehicle industry into turmoil, insists that the country should have strong decision-taking and unwavering leaders who will dispel personal gains and crack the whip to drive away corruption while instilling discipline in all sectors, in order that the country could emerge from one of its lowest phases in recent history with a record decline in business.

Dr. Lawrence Perera’s view is that gasoline engines will gradually go out of the market. He states that with the introduction of hybrid vehicles, gasoline engines changed, but that hybrids will survive only with combustion engines. ‘’whereas Japan went for the hybrid, China jumped into electric engines which will last for another 100 years. We should also adopt the electric car. With sunshine around all throughout the year, car solar batteries fitted to electric engines can be charged at no cost and what a saving on fuel that will be! Anyway, gasoline engines will gradually make its way out of the market, in not too distant future.

With the influx of hybrid and electronic cars an eco-environment challenge will be the lack of adequate provisions to dispose of used bittern such vehicles in the future. The lack of regulators for strict recycling and safe disposal of batteries will lead to them ending in garbage dumps. Another area that needs attention to curb pollution and improve and conserve of quantity is to adopt a long-term vision or polices of emission standards. The lack of the stable policy outlook may associate Sri Lanka with volatility and high risk.

Adding to his many innovative ‘firsts’, Dr. Lawrence Perera was the first to design an economical rail solution for the Sri Lanka Railway, in 2004, the first in Sri Lanka to assemble 4×4 SUVs under the technology transfer agreement with the Korean Ssang Yong motor company, with Mercedes technology in 2006, and the first to manufacture a luxury double decker bus with the latest technology complete with fully aluminium low floor monocaqne design for public transport in 2007. Commenting on his economical rail solution Dr. Perera says: “In 2004 I designed an economical rail solution termed ‘Lanka Econo Rail’ for mass transport to replace the car in the megapolis. My proposal was to build carriages using scrapped steel, with automatic doors, good seating and all comfort. My proposal envisaged buses at relevant stations to transport the passengers to their destination like the monorail or metro in foreign countries. It was a light-rail concept place of the heavy locomotive system which has been in operation for the past 164 years. However, this was blocked by railway officers who want the steel to be sold at dirt price by the kilo, as obsolete.

Dr.Perera attributes his success to his family – wife and two daughters who had been very supportive, without their support he wouldn’t have achieved so much. Dr.Perera is determined to showcase Sri Lanka’s potential in the international car industry.

By : T V Perera

Image Curtsey : Eranga Pilimatalawwe

BiZnomics Global Out-front Comments Off on BiZnomics Global Out-front 701

Global-Outfront

President Trump offered to meet North Korean leader Kin Jong Un at the demilitarised zone following the G 20 Summit raised prospects for a third face to face meeting between the two leaders.

G -20 Osaka Summit 

14th G-20 Summit – a forum of 19 member countries and European Union was held in Osaka, Japan 28 -29 June 2019 with the participation of heads of G 20 Governments. International Monetary Fund, Asian Development Bank (ADB), International Labour Organization (ILO), Organization for Economic Corporation and Development (OECD), United Nations (UN), World Bank (WB), World Health Organization (WHO), World Trade Organization (WTO), represented in the summit by their respective heads of Institutions. 

Global-Outfront-01

Collectively G 20 nations represent more than 80 percent of global output and 2/3 of its people. Easing the global tension centred around US – China trade dispute, President Trump announced that he has agreed to allow US companies to sell high tech components to Chinese telecommunication giant Huawei. He also announced that China will buy more US farm goods. US President indicated that US will call off raising tariff on Chinese goods and negotiations to end the trade dispute between two countries will continue.

Prime Minister Abe who hosted the G 20 Summit explained that global leaders have affirmed free and fair and inclusive economy and open competition are the principals to lead the world economy in future.

Global-Outfront
Source: IMF Economic Outlook

 

 

Global Outfront
Source: IMF Economic Outlook

 

As estimated by IMF total GDP of G20 nations of nearly USD 60 trillion account for 78 percent of the world total GDP of USD 88 trillion. In terms of population, G20 nations is estimated to have 4.6 billion people in 2019 accounting for 61 percent of the world total population of 7.5 billion. China takes the lead with 31 percent and India accounts for 29 percent making two emerging nations in Asia having 60 percent of the population of G20 nation.

By: BiZnomics research team

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