Fix export decline: IMF

Friday, 25 March 2011 03:50 - - {{hitsCtrl.values.hits}}

IMF wants increase; says

Sri Lanka share of global trade reduced from 0.08% to 0.06%; recommends more regional trade and CEPA

By Uditha Jayasinghe

The International Monetary Fund (IMF) yesterday urged an increase of exports by focusing on Asian markets and joining more bilateral agreements with powerhouses China and India.

IMF Representative for Sri Lanka and the Maldives Dr. Koshi Mathai while addressing a ‘Key Persons Forum’ organised by the Federation of Chambers of Commerce and Industry (FCCISL) told the gathering that Sri Lanka’s exports had declined.

He noted that previously Sri Lanka accounted for 0.08% of world trade, which has now declined to 0.06%. “The missing 0.02% can be found if people are smart,” he said, adding that Sri Lanka’s best option would be to divert part of their exports to emerging markets.

“At the moment around 60% of Sri Lanka’s exports are to the US and EU. These economies are predicted to grow at around 8% while the eastern and northern Asian economies are poised to grow at around 8%-9%. But Sri Lanka exports 1% to China and 4% to India. Clearly the objective should be to concentrate more on developing countries. India should at least count for 10% of exports.”

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For this he advocated signing the Comprehensive Economic Partnership Agreement (CEPA) with India and commended the Government for taking it up despite the intense controversy surrounding the agreement.

He also concentrated on the example of Korea and Malaysia as a great way for Sri Lanka to synergise exports. “Intraregional trade in South Asia is a lot lower than East Asia,” he pointed out, calling on exporters to find niche markets and brand their products for greater visibility. Branding Ceylon tea was quoted as an example of how Sri Lanka could increase its export competitiveness.

Dr. Mathai advocated the development of services such as accounting BPO and KPO as a way to tap into India and increase exports. “There may have been problems with the Free Trade Agreements (FTA) but we must work to fix them.”

Developing infrastructure, human resource and financial sectors were all highlighted by Dr. Mathai as catalysts for growth. While praising Government policies to introduce foreign private universities, the IMF Representative also called for the establishment of corporate debt in Sri Lanka so that companies would have access to long term credit.

“At the moment there isn’t a great divergence of policy between the Government and the IMF. Both sides see the issues in the same sort of way. However, these points need to be discussed widely so that all stakeholders are aware of what is happening and can contribute to shaping the future.”

Reiterating his stance that exchange rates must be flexible, Dr. Mathai also mentioned that fiscal deficit, for the time being at least, was under control. “These are the things that we in the IMF are paid to worry about,” he quipped, observing that by 2014, the debt to GDP rate would be reduced to 60%. “This may not seem much, but it is a far cry from the 80% rate.”

Responding to queries, he admitted that reducing deficits could have an adverse impact on poverty alleviation programmes, but that a more targeted approach would be more successful as it would bring development directly to the most vulnerable people.