Who will be the beneficiary of China-Sri Lanka FTA? Time to have a serious review

These days all eyes especially in the Asian region are directed towards China. The main reason is China with participants from 29 countries having a serious dialogue with reference to Belt and Road Initiatives (BRI). Perhaps the Chinese coined this as BRI most probably because it sounds similar to BRICS?

Anyway we are in Sri Lanka are more concerned about the China Sri Lanka Free Trade Agreement. When we make a very serious study we are a bit puzzled as to whose advantage this free trade agreement is initiated.

Most of the Sri Lankan industrialists think it is one-sided and the advantage is mainly towards China. When we review the following statistics we are in quandary about whether the whole country is daydreaming.

As per Daniel Workman from falgpictures.org dated 9 April, the Chinese export performance is seen in table 1. Total Chinese exports around the globe in the year 2016 was $ 2. 119 trillion.

Our closest country India has imported only $ 58.9 billion and they occupy the seventh position and Russia is occupying the 15th position with an export figure from China of $ 37.5 billion. At the same time Russia is 15th in the list. Now I wish to compare this with Sri Lankan imports from China. We have imported in the year 2016 only $ 4,273.58 million from China which is a very negligible amount when we compare with the Chinese total exports. 

So if any person argues that the Chinese are trying to increase their exports in a huge quantity it is very much far from the reality. With only a population of 21 m with very slow growing buying power China will never plan a huge growth in exports to Sri Lanka. With the above statistics we cannot say this agreement is in favour of China. What can they gain from the Sri Lankan market more than this?

Now I wish to compare our exports to China in the year 2016. Our total exports to China was only $ 1,999.15 million. The below chart shows our exports in the year 2016 to China and it’s in fact to both economies (see table 2).

The above six items have accounted for 75% of our total exports. The balance 130 items were responsible only for 25%. In turn if any industrialists or the Government think that we can have a huge jump in our exports as soon as we enter into a Free Trade Agreement with China, it will be totally out of context. Even though we have one of the biggest activated carbon production units in the world it has managed only to capture $ 6.64 million from exports to China.

Even with the advent of GSP+ our apparel producers will be in a position to definitely recapture the European market than the unknown Chinese market. Apparel manufacturers have already gone public that this sector is at the moment facing a huge labour shortage to the tune of 40,000 personnel (ref. Sunday Business Times 30 April). Even if we get a massive break from China, we cannot think we will be in a position to execute additional orders with the above lapses.

With the above if we think with the advent of the Chinese-Sri Lanka Free Trade Agreement, our country will have a massive advantage to capture Chinese market and move forward to achieve better prosperity by earning much-needed foreign exchange will not be a reality.

Now the biggest question is, who will be the beneficiary? As chamber representative if any one says we are still favouring a closed economy and we are suffering from an ‘islander mentality,’ it is definitely far from the truth. We are ready to go global. We know we have to go global if we have to usher a better living standard to our fellow citizens. At the moment with a 21 million population we are just fighting in the ‘red ocean’.

We 100% believe with the Chinese Belt and Road Initiative both countries can become winners. Even the Chinese understand more than Sri Lankan our geographical location on the Maritime Silk Road. Sri Lanka has the best location to gain momentum to drive our economy. We have to give priority to set up meaningful joint ventures with Chinese companies to produce to the whole world. For this even our current industrialists who have displayed capability by serving the local market with high quality must think seriously to work with Chinese counterparts to acquire new technology and to produce to the world market. We do not believe China is thinking to set up or shift Chinese polluting factories to Sri Lanka and get Chinese labour to work in those factories and produced goods to China. This will be definitely be against the new concept of Belt and Road Initiative.

The time has come for us, without wasting time on free trade agreements, to think of reducing the negative list and sacrificing Customs duty revenue of Rs. 24,967,217,196 and Cess revenue of Rs. 16,775,000,477 in year 2016 (source Sri Lanka Customs) from Chinese imports, we must seriously look into ways to get the advantage of developing the Sri Lankan economy by proceeding with joint ventures in line with the Belt and Road Initiative.

As we are in the middle of the Maritime Silk Road we can seriously consider mega projects associated with petroleum-based products and natural gas related ventures with Chinese counterparts. This will definitely enhance our country’s income and economic activities and at the end it will definitely generate more employment and income which will be mutually-beneficial to both countries. 

The time has seriously come for us to think about Chinese projects already undertaken with Belt and Road Initiative in Kenya (speed train with 475km per hour that will reduce the current journey by 20 hours), Pakistan (hydropower project), Djibouti port development and follow up on similar projects where we can improve our quality of life and industrialisation of our country. If such initiatives are taken, mobility of our population will improve and moving towards urbanisation will curtail. This will create a better green environment and our population will be in a position to find employment adjacent to their home towns. 

This will be in line with Chinese Belt and Road Initiative i.e. creating new employment opportunities and it will help in safeguarding our environment. Further it will help to building connectivity. So we have to keep the Free Trade Agreement on a side and seriously think about how to go global with Chinese new globalisation concept. 

(The writer is past Chairman, Ceylon National Chamber of Industries, and can be reached via email [email protected].)