Sri Lanka as a trading outpost

This piece is penned in the context of global uncertainty around trade.

The island is no stranger to trade. In fact in a speech in 1949 in London by C.E.P. Jayasuriya Trade Commissioner of the Government of Ceylon with Sir Oliver Goonetilleke in the Chair was heard to say, “As its position is central, the island is the resort of ships from all parts of India, Persia and Ethiopia, and in like manner, many are dispatched from it. From the inner countries (countries east of Cape Cormorin), I mean China, and other emporiums, it receives silk, aloes, cloves, clove-wood, sandal-wood and whatever else they produce. These it again transmits to the outer ports (those lying west of Cape Cormorin); I mean to Male (Malabar), whence the pepper comes; to Calliana (Bombay), where there is brass and sesamine wood, and materials for dress (for it is also a place of great trade), and to Sindon (Scind), where they get musk, castor, to Persia, the Homeritic coasts (Southern Arabia), and Adule. Receiving in return the exports of those emporiums, Taprobane exchanges them in the inner ports sending her own produce along with them to each.” (Translation by Tennent).

Cosmas, an Egyptian merchant, thus records an account of Ceylon given to him by a Greek trader named Sopater who visited Ceylon in the company of a Persian. “It is a great island of the ocean lying in the Indian Sea, called Sielendit by the Indians, but Taprobane by the Greeks.”

Fast forward to more recent times, countries such as India and China have vigorously pursued production and services for overseas markets.

Special economic zones (SEZ) in China 

Special economic zone (SEZ), any of several localities in which foreign and domestic trade and investment are conducted without the authorisation of the Chinese central government in Beijing. Special economic zones are intended to function as zones of rapid economic growth by using tax and business incentives to attract foreign investment and technology.

The first four special economic zones were created in 1980 in southeastern coastal China and consisted of what were then the small cities of Shenzhen, Zhuhai, and Shantou in Guangdong province and Xiamen (Amoy) in Fujian province. In these areas, local governments have been allowed to offer tax incentives to foreign investors and to develop their own infrastructure without the approval of the central government. Business enterprises have made most of their own investment, production, and marketing decisions, and foreign ownership of such ventures has been legalised. Though some of them began as little more than small towns, the new SEZs soon attracted foreign investment and became boomtowns, with rapidly expanding light and consumer-goods industries and growing populations—notably, Shenzhen’s population grew from some 30,000 in 1979 to more than 1,000,000 by the beginning of the 21st century.

Encouraged by the zones’ success, the Chinese government in 1984 opened 14 larger and older cities along the coast to foreign trade and investment. These “open” cities offered foreign investors much the same incentives as in the special economic zones, but their corporate income taxes were higher. In 1988 Hainan Island was made a separate province and a special economic zone, and in 1990 the Pudong area within the Shanghai municipality became a special economic zone with policies even more flexible than those already in force in the original four SEZs. In 1992 the Chinese government decided to adopt some of the same policies in some two dozen major cities in inland China, including many provincial capitals, as a means of encouraging foreign investment in them.

Invest India

As the fastest growing large economy in the world and with a population over 1.4 billion, India is the world’s fifth largest economy with a GDP of $ 3.4 trillion and is expected to surpass Japan and Germany by the early 2030s to become the world’s third largest economy. 

As India’s national investment promotion agency, Invest India acts as a concierge, gateway, and facilitator for every investor, trader, and R&D partner looking to engage with India.

The organisation, formed in 2009 as a partnership of the Ministry of Commerce and Industry and Industry Associations, is committed to guiding and assisting both domestic and global investors, strategic planning and execution of policies, incentives and initiatives that foster investment, streamline business processes and support investors throughout their business lifecycle.

In the new mandate, Invest India is entrusted with three key responsibilities: Facilitating investments; Facilitating trade growth and working with the investors and supporting them till they see a return on investments; and Identifying and enabling research and development collaborations, with a focus on deep technology and AI across all sectors from electronics, energy, automotive, agriculture and pharmaceuticals.

Special Economic Zones in India

Features of SEZs

• As opposed to the international counterparts, the SEZs in India are developed by the government, private, and the joint sector. Hence, it provides equal opportunities to both local as well as international players.
• The government has allocated at least 1,000 hectares for the greenfield special economic zones in the country. However, there is no restriction as to the favourable areas in constructing the specific SEZs.
• 100% of the FDI is allowed for all SEZ endowments apart from the activities listed under the unconstructive records.
• The SEZ units are required to encourage the net foreign exchange yield. They are not entitled to any least amount of additional guidelines or exports.
• Commodity boost from the DTA (Domestic Tariff Area) into the SEZ is known as exports, while the commodity boost from the SEZ into the DTA is called imports.

Special Economic Zones in India are controlled by a three-tier structure:

• Board of Approval: Supreme controlling body in the department
• Unit Approval Committee: SEZ development and other related issues at the district level
• Development Commissioner: Controlling the unit approval committee

Advantages of SEZs to businesses

• Businesses are entitled for a myriad of benefits and incentives along with a simplified operating environment
• Duty-free import of raw materials for production
• 100% income tax exemption on export income for SEZ units for the first 5 years, thereafter 50% for the next 5 years
• Setup of businesses without any hassles of licenses or lengthy procedures
• No license is required for imports, including second-hand machineries
• Exemption from Goods and Service Tax (GST)
• Single-window clearance mechanism
• External commercial borrowing by SEZ units up to $ 500 million annually

Objectives of the SEZ Act in India

• Generation of additional economic activity
• Promotion of exports of goods and services
• Promotion of investment from foreign and domestic sources
• Development of infrastructure facilities
• Creation of employment opportunities

Example of single point fast track clearances (Andhra Pradesh Industrial Single Window Clearance Act, 2002)

• Act may be called the Andhra Pradesh Industrial Single Window Clearance Act, 2002.
• The State Government may, by notifications, constitute a District Single Window Clearance Committee for each district, which shall l consist of the District Collector as the Chairman and eight other members for such term as notification. may be specified in the notification;
• The Government may, by notification, constitute a State Committee known as the State Single Window Clearance Committee, which shall consist of the Commissioner of industries as the chairman with ten other members for such term as may be specified in the notification;
• Under the superintendence, direction and control of the respective committees, the nodal agency shall acknowledge all applications filed before the Committee and shall forward the applications to the concerned competent authority within three working days. The Nodal Agency shall pursue the clearance of the applications with the competent authorities;
• While prescribing time limits under section 14, the State Government may notify the clearances in respect of which failure of the competent authority to pass final orders on the application within the stipulated time shall result in deemed approval.  

Open Sri Lanka – Green card regime for brain gain

We are blessed with a vast, largely untapped human capital and financial resource base of Sri Lankan origin overseas acquired on account of learning and application in jobs and enterprises overseas. Some were and at the pinnacle in their respective vocations. 

People of Sri Lankan origin overseas (PSLOO) can play a major role in development initiatives in the country, providing funds for investment, producing international awareness, and bringing back knowledge gained by practical experience and networks to help the growth and development of their countries of origin. 

Our pursuit of markets 

We need to forge compacts with countries such as South Africa, countries in the Middle East, UK, Europe, Russia, China, and Canada, countries in the Far East, Australia and New Zealand.  Nearer home an Extended Common Market with India would prove beneficial. In doing, Sri Lankan people can upskill, learn global best practices, access latest technology and business methods, and spur entrepreneurship among the youth of Sri Lanka. Investments in Education, Energy, Tourism, Manufacturing, Textiles, Aqua Culture, Fisheries, Agriculture, Seeds, Logistics, Packaging and IT are all options. India has produced over 100 unicorns in the past two years and 1 out of every 10 unicorns globally is from India. The India government Skill India initiative has trained over 40 crore Indians, creating an empowered workforce through various schemes and training courses. 

An India-Sri Lanka special purpose compact focused on skilling with GoI courses from states, investments to build up our fisheries sector to fully harness our maritime zone, bringing in Indian IT expertise to Sri Lanka, strengthening existing education systems, tourism, healthcare and diagnostics, education and training including teachers and nurses, seeds and agriculture, renewable energy, electronic servicing and digitalisation, wind turbine manufacturing, courses such as Cyber, Digital Forensics and Forensic Psychology which can create high end global job opportunities in Sri Lanka, labour for Indian garment sector.

At the meeting the President convened with All Parties the notion the current turbulence is an opportunity was mentioned. This piece itself shows how China and India have progressed. We could do well to reflect and repurpose ourselves.