Departing EU envoy recaps success and challenges

EU Ambassador  to Sri Lanka Denis Chaibi - Pic by Lasantha Kumara  

EU Ambassador for Sri Lanka Denis Chaibi is departing after an eventful and successful four-year stint in Sri Lanka.

The Daily FT had the opportunity to speak with him exclusively before his departure to get an overview of his tenure in Sri Lanka, which was significant for a number of major improvements in bilateral cooperation between the EU and Sri Lanka as well as EU support for Sri Lanka.

Incidentally, after assuming duties in November 2019 Chaibi’s first print interview was also with the Daily FT.

The Ambassador shared the status of EU-Sri Lanka ties and their future potential, as well as insights on Sri Lanka’s own challenges and opportunities in overcoming the economic crisis as a progressive nation. Following are excerpts:

By Charumini de Silva

Q: Could you briefly recap the status of EU-Sri Lanka relations? 

A: The EU-Sri Lanka relations are good based on engagement and mutual respect. It seems obvious to say it now. But, when the previous President was elected, one could have thought that looking at the past, we would have friction again because, in the past, Mahinda Rajapaksa was present when the GSP+ was withdrawn and there was not much contact between 2010 and 2013 and even 2013 to 2015 was a bit tense without proper deliverables, concrete results of the relationship. One could have thought that the same would have occurred in 2019, but not at all. There was mutual engagement and lots of exchanges and discussions. 

I think those exchanges and discussions were quite useful when the situation deteriorated and a social meeting took place. I believe the EU conveyed a message that held value for all markets. In a nation with a history of violence and a transition of power, this message carried significance.

So now, more recently, the last big dialogue between the EU and Sri Lanka was the Joint Commission which took place on 9 May 2022 chaired by EU Deputy Managing Director for Asia and the Pacific at the European External Action Service Paola Pampaloni and Foreign Affairs Ministry Secretary Aruni Wijewardane. There was a strong focus on economic recovery. The EU can help and also discuss the draft Anti-Terrorism Bill, because that’s one of the key elements for GSP plus, and it was also a commitment to hold another investors dialogue to see how European investment could help Sri Lanka. Overall it is a very positive picture indeed. 

Q: You assumed duties in November 2019 amidst political changes in Sri Lanka. Shortly after the pandemic, the country experienced the worst economic and political crisis. How was that experience and has the country progressed since then? 

A: I saw the shortages and I saw the demonstrations and I was struck by the resilience of the Sri Lankans. Try to have this kind of queues or shortages in Europe; people wouldn’t help each other as they were helping here, you know, with water and snacks for those in the queues. The situation is much better now, but I think the road ahead is still difficult and the recovery will not be quick. It’s good that we are back to something closer to normal life, but there are also a lot of vulnerable groups having difficulties and the prospects of economic growth seem a bit far for different reasons. So what we hope is that there will be serious progress on governance and the use of resources and that therefore the next administration can walk a faster rate of economic recovery.

Q: There has been some progress on political and economic reforms post-August 2022, though today there is renewed debate about the way forward. Any thoughts? 

A: Yes, as I said, the road ahead is difficult. The first immediate challenge is to finalise the debt restructuring with the international partners as the domestic debt restructuring has taken place. It’s not for me to say if it’s right or wrong, there’s a choice that has been made by the authorities and the people have to assist that. But a debt restructuring with the outsiders will be important for the EU as an organisation or for the European Investment Bank. So it’s a multilateral development agency. So it is protected in a way that individual member States, such as Germany, have the debt and they will assess how the debt restructuring can be done. 

What is important is that member states of the European Union play a crucial role and are trying their best to facilitate the debt restructuring through the Paris Club. So, member states are very active, and I think very helpful for Sri Lanka. The second challenge is economic reform; as I said, several measures have been passed already, but more have to come and the road to economic growth for Sri Lanka has to go through significant reform. We are at the end of a very protectionist model, which over-relied on borrowing and unhealthy public finance, and there’s no way to go back and borrow more with the same model. Now there has to be more value addition within Sri Lanka, but also with Sri Lanka being part of a wider economic network, these economic reforms have to provide more revenues to the State. Sri Lanka needs more tax revenues, which is very hard because the middle class in Sri Lanka has suffered a lot through the crisis. 

The third big step is to set up an efficient social protection mechanism to look after vulnerable groups. In this regard, it’s good that the Government has moved from a wide general scheme to something more targeted. It is with the support of institutions like the World Bank and other UN agencies. It is an important factor and I’m sure that international donors want to support this initiative. Finally, integration is important with other partners to be more dynamic in trade. It urgently needs a trading strategy in the long run. Sri Lanka also needs a strategy to access green finance to access investments that will enable Sri Lanka to have a green transition. 

On the political side, it is more sensitive. Local elections or provincial elections are overdue, and I think it would be a good tool for better use of public resources if there was more scrutiny locally and provincially. So the elections would be really useful, and it’s also in respect to the Constitution. 

Q: Could you list key initiatives undertaken during your tenure which in your opinion helped to further strengthen EU-SL ties?

A: The EU works with a program of seven years, so, there was 2014-2020 and now there’s 2021-2027. During 2014-2020, we focused very much on rural development. We improved agricultural production, we developed entrepreneurship in least favourite areas or rural areas. We also looked at the social pillar of our assistance. The EU has launched a huge justice program called Justice Reform (JURE), which favours access to justice, and modernisation to make it more human-centric. We are doing a total of 18 million Euros so it’s a massive program. 

We have 10 million Euros with the World Bank on Public Finance Management against these kinds of things and better governance. We have also done 5 million Euros in promotion of tourism because, at the time of COVID, we thought that tourism would need to be supported when the economy reopened, so it has proven very useful with good foresight. 

But what is also very important is we promote gender and a better gender balance. We at the EU think that Sri Lanka would be in a much better position if there had been more women in power before the crisis. We are also convinced that it is important to keep the reconciliation process alive so that when circumstances are appropriate, there could be a full reconciliation based on devolution, empowerment, economic progress and accountability. For the future 2021-2027, the EU is very much focused on a circular economy, green recovery, peaceful and cohesive society where we are looking at ways to make sure that people live together without being in conflict because there are fewer resources and more poverty. So, we have a lot of actions in the pipeline.

 Q: In your view, how important and progressive have EU-Sri Lanka relations been? 

A: Yes, I think if we take a step back, they’ve been very good. The EU has invested all grants, not loans – so no repayments, no bankruptcy, but has invested over a billion Euros over the last 25 years. It started with the civil war, tsunami and then in 2014-2020 we were down to 200 million Euros. During the past three to four years over 65 million Euros were spent. Overall, there’s been considerable money, but more than money it is what Europe constitutes as a revenue source for Sri Lanka. So if you look at what are the main revenues of foreign exchange for Sri Lanka; remittances, we don’t have the same magnitude of remittances of the Gulf countries. However, the large diaspora in France and Italy provides more than remittances. They are providing investments and they invest in properties, small hotels and restaurants, so not only do they bring money, but they also bring know-how and resistance which is very important for Sri Lanka. 

We provide a lot of tourists, almost 50% of the number of arrivals, but what is important is that European tourists stay twice as long and they spend twice as much as the average other tourists. In numbers EU accounts to 50%, but in terms of expenditures, it is much more. What’s important is that the arrivals are not concentrated only in Unawatuna or Weligama, but countrywide. That’s why we’re very proud to have done this Pekoe trail. This trail goes through the country because this is something that Europeans will be sensitive to – the beauty of Sri Lanka beyond the beaches, culture and nature. 

The other factor is exports. The EU is the second export market, very close to the US and we are providing real market access with GSP+ which makes Sri Lanka competitive. The important factor is that we have to think beyond that. We believe that Sri Lanka should not over-rely on these good European tourists or Sri Lankans living in Europe or the purchasers of garments, tea, rubber and coconut — we think that the future is more for services, for a wider range of interaction between Sri Lanka and Europe. We believe greatly in the potential of Sri Lanka.

Q: The EU is one of the key development partners and the largest tourism source and export region for Sri Lanka. In your view, what should Sri Lanka do to continue to benefit from this status?

A: Well, as I said, we are on a good path. So let’s make sure we stay on the good path. The first thing is in 2017 when Sri Lanka got the GSP+ back, it had committed to review the PTA in a meaningful manner. So that’s been a reform last year which is a good first step — but it’s not sufficient. So we are glad that the Government took a series of steps. Over the last three years, there have been several releases of detainees of PTA. There has been much less use of PTA. At some stage, it was a de-facto moratorium and we hoped that this would last. The new Government suspended this moratorium, but at least we can see the judges are more empowered to scrutinise each case, which is a welcome move. But still, we are eager to see the Government discussing a revised draft of the Anti-Terrorism Bill. 

The first draft caused some troubles in civil society and it’s not just civil society activists — it was the Bar Association and many legal experts who pointed to the flaws of this revised new text. So we’re very encouraged by the fact that the Government decided to listen to the Sri Lankans who voiced some criticism about this new bill and we are very eager to see the new text after its revision. This is important because of the European Parliament which has a big say on the GSP+ issue. There will be a delegation at the end of October. So that will be the opportunity to have good exchanges. So let’s say that the Government manages to pass in a new text or at least doesn’t use the old one — then we will be in a good place. As I said, elections are important. So a schedule for the series of elections that will possibly come next year is important. 

Another factor is freedom of expression. I think that there is overall some freedom of expression. But sometimes we can see that civil society feels a bit intimidated by certain actions and I think it’s important for the authorities to realise this perception and that’s part of the debate GSP+. Overall, we are on a good path, but there are several steps that we hope the Government will take in the coming weeks and months. Thereby, in the next Joint Commission, we can have a very good positive discussion.

Q: How has Sri Lanka progressed in terms of democracy, good governance and reconciliation since the new administration? 

A: It has been a bit more than a year or 13 months. What we can see is that the social protection policies that address corruption are welcome. But we have to make sure that in tackling those issues, there is still respect for fundamental rights, including freedom of association and we’ve seen that sometimes reaction seems heavy-handed. On the one hand, we have seen the troubles sometimes getting out of hand. But on the other hand, it’s important that people feel that they can demonstrate. So we have to assess this. In the wider context, as I said, elections for democracy are quite important. On reconciliation, there have been several measures put forward, including the Truth and Reconciliation Commission. Let’s see how this pans out, but what is essential is to keep trying. 

Often Sri Lankans refer to Singapore and say now we want to be the new Singapore and they think that Singapore developed economically because Lee Kuan Yew had a very strong hand. But they also developed because all the communities – the Indian, Malay and Chinese communities worked together. They didn’t spend their time competing with one another politically but they united all forces and focused on economic growth. I believe that’s an important lesson for Sri Lanka.

Q: In your view, what role can the private sector and civil society play in shaping Sri Lanka’s future?

A: Both are very important and they’ve proven so over the last decade. I think that civil society played an essential role in mobilising society regarding the events of 2010-2014 when there were several journalists, disappearances and far less freedom of expression. Thus, I think civil society managed to mobilise and keep society at large, mobilised, so it showed how the Sri Lankans are resilient and how they can manage to bring about change. So they’re essential, and they’ve shown it, and we hope that it can remain as vibrant and as outspoken, as it has been over the last few years. 

I think the Aragalaya movement was very interesting. It was perhaps less structured than certain civil society organisations but at the end of the day, it’s still a manifestation of civil society. It shows that the wind of change is blowing in Sri Lanka. So sometimes it is up, sometimes it is down. But it is a testimony to civil society in Sri Lanka. In terms of the business sector, perhaps they’re more discreet in terms of action and are perhaps less visible. But they still play a big role. I think that for them GSP+ is very important and therefore they sometimes can explain certain points to the authorities to make sure that GSP+ is kept and that the trend goes in the right direction that might be in environmental standards and labour standards or human rights. 

What is also important is to try to keep high social standards in Sri Lanka and that was seen also during COVID and now. They stretched the solidarity that normal businesses around the world expressed and they went beyond that. That to me makes the corporate world quite an interesting partner for the EU to discuss reforms and the way forward.

Q: Sri Lanka grapples with a massive human capital challenge in terms of skills and ready availability amidst the economic crisis. So people are both a strength and a challenge for Sri Lanka. Any thoughts on tackling the issue? 

A: It’s a very sensitive issue and I can see very passionate debates on Twitter and Facebook on this and the vivid exchanges. It is quite interesting for Europeans because Europeans are on the other side of the equation and it’s funny because in Europe the perception of migration is also quite a sensitive issue and emotional. Migration is perceived as the exact opposite of a brain drain, that Europe attracts people who will not make any value and will take advantage of the welfare system —which may not be a correct perception. But it’s interesting to see how emotional migration has become. Emotions don’t help with a good analysis because migration has always occurred. 

The people in Sri Lanka may have come many, 1,000 years ago. But even within Sri Lanka, populations are migrating around the territory. It is something natural — people pursue resources and are not always stopped by just lines. Now, that’s for the overall context, but now more specifically for Sri Lanka. One has to realise that between 2019 and 2022, the Government encouraged its people to go abroad, and the focus was on remittances rather than investing in people. One can perhaps now blame for what has occurred, but what has occurred was with strong incentives from the Government. It was a policy of the Government and public servants and others were given the possibility to leave in good conditions. One is to realise that this is a response to certain incentives, then the economic crisis, but this is totally in a stronger dimension. 

Now, I think that on the way forward to more economic growth it’s important that the Government starts to think about investing in its people. I think that it’s going to be very difficult to generate fast economic growth on the back of a brain drain, you need to have very good human resources to be in Sri Lanka and drive this progress. I don’t think that at the moment, there’s enough public funding to invest in the people in the way it should to guarantee economic growth, which means that if Sri Lanka wants to invest in its people, it needs to be open to foreign investments in a way that is conducive to investment in people. 

Once again, I’m going back to services where now IT, engineering and health are all that whichever high premium in terms of services can be invested in by possible investors. Sri Lanka is the nicest place to live in South Asia. So for it to become a central service for the entire region, it’s a region that has more than 2 billion inhabitants. It is not a difficult proposition. But it requires a kind of change of mentality and mindset so that it is open to investment so that companies can make these essential services for the region. I think that is one way where we can stop the brain drain and have better economic growth based on the Sri Lankan people.

Q: How do you see Sri Lanka’s future socio-economic growth potential?

A: This is about opening up the economy and bringing in economic reforms so that Sri Lanka can be more competitive, but also be a central reference for the entire region, be it in IT, engineering, health, finance, hospitality, or MICE tourism areas, on a wider scale.

Q: In the EU’s view, what are Sri Lanka’s medium-to-long-term challenges?

A: The first big challenge, I would say, after four years here, is that the entire country works together, the country taps into all its resources. So that means that the country taps into all its communities, not just majoritarian representation that it helps in its entire people. I think that there should be more women in positions of importance — in politics, in business, and that, as you mentioned, on the brain drain that it taps in all the people who are educated rather than lots of them leaving. 

The second big challenge is a better use of public resources or governance. I think that anything that is linked to the use of public resources has to be more transparent. There’s technology, and procedures for that. As I said, the EU is providing a 10 million Euros grant and public finance management. So anything that has to do with the audit with scrutiny, with tenders, procurement, all that can be improved, because that will allow for a much better use of the public resources and it will bring a new approach to public resources with much more accountability and responsibility. 

The third big challenge in the opening of the economy is that Sri Lanka accepts that, you know, some sectors cannot just be based on rent, but have to be submitted to a more competitive process so that there’s a better quality or value for money for what is spent. 

The final very important element, which follows logically from the three previous ones, is how it should pick and integrate regionally, to be in the value chain and more productive economic circuits. I am not just thinking about India, although it is a key partner. As EU we believe that if the conditions are met, we will come up with investments. Also, it is part of a new value chain with Southeast Asia which has been quite dynamic for some time which has lots of factories and services that could be coupled with Sri Lanka. In terms of accumulation of value, inputs, raw materials, and more integration between Sri Lanka and other countries in the region would be something to be achieved in the medium to long-term.

Q: What memory of your tenure in Sri Lanka will remain with you forever? 

A: My wife and I had the best memories of all the people we’ve met in Sri Lanka. They have been extraordinary to us, very respectful and friendly. We’ve just done a series of farewell dinners and meetings. They will be in our hearts forever. I will come back as a non-ambassador and as a very simple tourist and cycle countrywide.