Thursday, 24 October 2013 00:00
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THE Japan External Trade Organisation (JETRO), which spearheaded the arrival of the largest-ever business delegation to Sri Lanka, also undertook an interesting study on how business between the two countries can be improved.
The highly-useful report based on the survey titled ‘Needs and Strategies for Japan-Sri Lanka Business’ was presented to President Mahinda Rajapaksa and contains useful if not revolutionary suggestions.
The objective of the survey was how best to attract foreign investment in the manufactured exports sector, which is essential for diversifying Sri Lanka’s export products base and reducing the trade deficit. It is also crucial for Sri Lanka as it looks to become a developed country and break past the middle income sphere.
As part of the exercise, JETRO interviewed 102 Japanese companies and Multi-National Corporations (MNCs) in Japan, Singapore, India and Sri Lanka. Inputs from these companies inspired key recommendations for the strategic directions that Sri Lanka should take in luring Japanese companies and other Foreign Direct Investments.
JETRO has suggested two business models that Sri Lanka can adapt or accelerate. One is the maximising Sri Lanka’s potential as the most efficient gateway to India using the existing Free Trade Agreement (FTA) between the two countries, as well as a slew of other advantages including close proximity and the logistics prowess.
It has been suggested that Japanese or other companies could import raw material from Japan or Singapore, add value and export manufactured products to India using the FTA. An existing Japanese company already successfully engaged in such an operation has been highlighted by JETRO. In such a scenario the long-delayed Comprehensive Economic Partnership Agreement (CEPA) deserves another look as well as upgrades to trade partnerships Sri Lanka has with other South Asian markets.
In fact business model 2 is all about maximising search and successful penetration into new export markets. Aside from other South Asian markets, Sri Lanka should look at ASEAN, China and Japan and the West (Middle East, Africa and Eastern Europe). Sri Lanka is already fast-tracking a Free Trade Agreement (FTA) with China, some might argue more quickly than prudent, but it could provide an important impetus for investors.
Having realised the enormous potential, the JETRO study has also identified several constraints which, if addressed with the recommended solutions, Sri Lanka can convert the opportunity into reality.
JETRO has suggested that a greater pool of industrial human resources such as skilled labour, engineers and managers will address the human talent challenges for foreign investors. Reducing massive brain drain is an essential step in safeguarding professionals and encouraging others to return. It is also an aspect that has received little attention from the Government, with steps being taken to actually encourage migration.
A more consistent and clear industrial policy will be useful as well to lure more manufacturing ventures and FDIs, points out the study, including more efficient and effective one-stop services at the Board of Investment for convenience of investors. This, along with streamlining taxes, has been suggested to policymakers time and again. In some ways the JETRO report is just old wisdom in a new format, but the importance of it being heard remains the same.
