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Key insights at first-of-its-kind platform at Fireside Chat organised by Daily FT, ICCSL, and CIMA
By Charumini de Silva and Uditha Jayasinghe
Growth in a globalised world requires working with partners, learning from others and adapting international best practices. Insights and recommendations from a wide variety of country representatives were showcased recently at Fireside Chat 2019, with each giving their ideas and perspectives on a range of topics including investment, conservation, transparency, taxation, education and skills development to be adopted by Sri Lanka to move forward on its growth journey.
British High Commissioner James Dauris, China Deputy Chief of Mission Hu Wei, European Union Delegation Deputy Head of Mission Thorsten Bargfrede, Switzerland Ambassador Hanspeter Mock, Canada High Commissioner David McKinnon, Netherlands Ambassador Joanne Doornewaard, Malaysian High Commissioner Tan Yang Thai, Bangladesh High Commissioner Riaz Hamidullah Turkey Ambassador Tunca Özçuhadar and Indonesian Ambassador Gusti Ngurah Ardiyasa listed out some of Sri Lanka’s key challenges, along with recommendations drawn from examples from their own countries and others around the world.
The envoys were featured at the packed Fireside Chat organised by Daily FT, International Chamber of Commerce (ICC) Sri Lanka and Chartered Institute of Management Accountants (CIMA) last Tuesday. The event also saw the participation of Prime Minister Ranil Wickremesinghe and business personality Dhammika Perera. The session was moderated by ICCSL Chairman Dinesh Weerakkody and Co-Moderator Daily FT Editor and CEO Nisthar Cassim.
The evening kicked off with a box filled with questions being passed around and each of the Ambassadors having to pick one. The questions ranged from challenges posed by social media to the job role of diplomats, to the weightier tasks of fostering growth, improving skills, providing technical skills to developing countries, and even the impact that rising protectionism could have for countries like Sri Lanka.
Britain will keep investing in free trade and will remain a strong advocate of free trade around the world. We are ambitious to grow trade with the world. Despite the bumpy circumstances we may face post Brexit those countries that benefited exporting to EU including Sri Lanka will be extended the same preferential rates – British High Commissioner James Dauris
Q: How are your countries benefiting from economic diplomacy and has the job description of ambassador changed in the past five years? If yes, how? How has social media impacted the job of a diplomat?
Malaysia: Economic diplomacy is always very important to Malaysia. Malaysia has benefitted tremendously from economic diplomacy. I just want to recall our Prime Minister Mahathir’s actions when he was re-elected again last May, the first thing he did was fly to Japan. Why Japan? Because Japan will be able to invest in Malaysia and could consider giving loans. It is economic diplomacy that comes on top when the new government took over Malaysia.
Also, my job has changed tremendously during the past five years because of the impact of social media. I think all Malaysians know what we do because we are on twitter and Facebook and this has added some pressure on us. We have to act very quickly, especially if they are facing some difficulty we have to be forthcoming. Other ambassadors will also agree with me on this. We also need to be active on social media to act almost immediately.
When I joined the Foreign Ministry almost 20 years ago, the internet was just about to become explosive. We were basically using telegram, telex, and fax but I think we are no longer doing those traditional communications anymore. Everything is on mobile phones, barcodes, and is password protected now.
Q:What are the pros and cons of having Free Trade Agreements (FTAs) for an emerging economy like Sri Lanka?
UK: Our benefits that flow from free trade is prosperity. That is the reason why the British Government said whatever happens with Brexit, Britain will remain a determined advocate of free trade around the world. FTAs not only give access to markets, but also allow exporters to have preferential access. Of course, FTAs are also not entirely beneficial, they also pose certain risks. There’s the risk of product dumping or job losses in some economic sectors, but those aspects can be handled by governments. However, that’s not an argument to say no to an FTA.
Danger of over-protectionism is another key factor. There are good reasons to give some protection to sectors in the domestic market at certain times and certain circumstances. But the real danger of one’s protectionism is that it can make it very hard to move on from inefficient and uncompetitive companies. When companies are both efficient and competitive it allows them to strive for excellence.
You recently launched your So Sri Lanka campaign. This is very important so people can relate to Sri Lanka. We had ‘Malaysia, Truly Asia’ for more than 25 years and we never changed it. That is brand building and Sri Lanka is doing that – Malaysian High Commissioner Tan Yang Thai
Q: Sri Lanka has increased its performance in exports. But right now the country is more dependent on low technology products. How can we move to high value products?
Bangladesh: There are four things that are rapidly changing. These are future of production, enterprise, schemes and learning. We have to get the foundation right. The National Export Strategy (NES) is a fantastic product, but you need to get the right implementation with the right policy mix. In addition, regulations and modes of supply need to very agile. This will help to move from one type of product to another. Lastly, how we manage expectations, worries and tensions is important to become more competitive.
Q: What makes one economy better than another? Where can we look to grow the Sri Lankan economy?
Netherlands: This is not an easy question to answer. There are many aspects to this. You need the right policies, legislation, money, good partners, skilled labour force, and a bit of luck. In Sri Lanka you have a lot of educated people. There are many opportunities as the economy is growing. Reforms are being implemented, but it can move at a much faster pace. Also you are missing out on the women. I see huge potential in increasing women’s participation in Sri Lanka’s economy. To create an enabling environment, to treat them as equals. There is a huge labour force waiting there.
Improving skilled labour is critical. Training a waiter is as important as training a General Manager of the hotel, so both service skills and management skills need to be improved. We need special trainings and systems that are aligned with the industry and work closely with businesses. Keep the doors open to investors – EU Delegation Deputy Head of Mission Thorsten Bargfrede
Q: What is Netherlands doing to improve women participation in the economy?
Netherlands: We try to accommodate, indeed to enable equal care of the family, by encouraging the division of responsibilities between both for the male and female family members. Both parents get leave when they have a kid so that not just one person is tasked to do all the household work. Providing part time jobs is important to improve accessibility. Providing employment doesn’t necessarily mean working from eight to five. There are other ways of making them work from home and through part time jobs.
Q: Agriculture is a significant contributor to the Sri Lankan economy, hence the need to increase productivity. What are the lessons from an agriculture dominant country?
Canada: Agriculture is a significant contributor to our economy, even though I’m not sure if we are an agricultural dominant country. From Sri Lanka’s perspective agriculture is 6%-7% of the total GDP, but it also takes up 25% of the total employment. In Canada it is a similar part of the economy, in terms of the GDP it is about 12.5%, but the difference is that in Canada there is a large Agri-food sector, not just farming; but in the food processing and value adding sectors.
Over 100 years ago half of the Canadian population would also have been engaged in agriculture. But overtime technological changes in terms of machines on farms took place; it is now mainly driven by bio tech advancements which helps to add value. In Canada, it was also about opening up and liberalising our agricultural markets, and as a result we saw the US-Canada FTA which allowed some major improvements in our economy. I would encourage Sri Lanka to pick what can be taken more differently and create a more predictable economy for the investors to add value.
We have a range of colleges that provide very applied and sophisticated degrees. It has allowed young Canadians to choose from a large number of platforms. Not every student responds to learning the same way so if you have a rigid system then you leave a lot of talent behind – Canadian High Commissioner David McKinnon
Q: What are some of global risks that can affect Sri Lanka in the next three years?
China: Protectionism is the major risk that will impact Sri Lanka. Globalisation is unstoppable. You can do it correctly or not. No country can do everything on their own, especially for the developing countries considering the small scales of their economy, so it is important to partner with other countries to grow.
Q: In your country how do you select diplomats for overseas appointments?
Swiss: In Switzerland, diplomacy is a job, so in my country probably 95% are career diplomats, but there are a few exceptions. The most famous one is probably Roger Federer, the best ambassador of Switzerland worldwide. Diplomats in Switzerland need to be specialists who can be appointed at any time. The exceptions are if you happen to be Swiss and can speak Chinese, Russian or Arabic, your chances of becoming a diplomat in one of these countries are higher.
Before an assignment we of course get a short training, like a preparation. We go back to the capital to learn and we have a three-day session before the services training to know about the country of destination. On a personal note, I arrived in this country six months ago, after Argentina. I had no knowledge about Sri Lanka and Asia in general, but I am thankful for this beautiful country for offering me – almost on arrival – a 52-day crash course on Sri Lankan politics.
Q: What does Sri Lanka need to do to improve ease of doing business?
Turkey: This is not just a problem for Sri Lanka, but for every country. In terms of Sri Lanka’s rank in the Ease of Doing Business ranking out of 190 countries, Sri Lanka is ranked at 100. Transparency is one important factor for making a country attractive to investors. Another factor is energy prices. If someone wants to set up a company in London, it takes only eight minutes. In Sri Lanka, the approval process needs to be reformed. It takes ages to get approval for certain projects. I know from several Turkish companies who wanted to set up some businesses here in Sri Lanka, but the approval procedure is a really hard procedure.
Another important factor is the number of taxes; well I shouldn’t say this in the Prime Minister’s presence, but it needs to be reconsidered. Protection of investors is another crucial factor. Last but not least is good practices in the regulatory field, where Government regulations have to follow good practices and good governance.
Q: To establish a vibrant and skilled labour market, what are the practices we can apply?
Indonesia: Policy consistency is very important. I think not many countries can generate their own labour. We cannot generate the full labour and that is why we are open for skill migration, but with a limitation. The Indonesian Government is very keen on building and grooming skills. The Government has improved the vocational training in all sectors. This way we can improve the skill sets of our people and improve talent.
For developing countries the usual practice is to start by borrowing money and then investing it. The only problem is how to find a balance for that because you must think of how much you can repay? When can you repay? If you are borrowing to develop your local industries then it is fine. But for the record let me point out that loans from China only make up about 10% of Sri Lanka’s foreign debt – China Deputy Chief of Mission Hu Wei
Q: What are your comments on the tourist educational sector in Sri Lanka? How can we improve?
EU: Sri Lanka is a beautiful island and we have nothing to do in terms of its natural beauty. The tourism sector has already seen substantial growth, but the potential for Sri Lanka is very high compared to other countries in the region. Having said that, there is also a lot of room to improve in terms of road connectivity, infrastructure and training of skilled labour.
Improving skilled labour is critical. Training a waiter is as important as training a General Manager of the hotel, so both service skills and management skills need to be improved. We need special training and systems that are aligned with the industry and work closely with businesses. Keep the doors open to investors. Don’t close the market and divide the trade partnership – because with investments they bring in knowledge, capital – and ensure conducive conditions are also there for them. Stay open and learn from others.
Planning is another important area. As tourism grows, there is a tendency to have unpleasant construction coming up everywhere, so we need to plan not to ruin the beauty of the island. A lot can go wrong if it is unplanned for quick money and end up with ugly buildings. It’s not yet happening, but we need to be cautious. Have special zones, be clear on what type of tourists you want to cater to. Don’t forget vocational training sectors. You not only need top engineers, you need electricians, plumbers and so skills need to go bottom-up.
Q: Bangladesh has been maintaining a consistent 6% growth for the past 10 years, what made this possible?
Bangladesh: For the past decade we have seen political stability which resulted in progression with implementation of civil services systems, understanding procedures, co-ordination, coherence and policy control. We are experiencing an export-led growth today, but we opened up our economy many years ago having a much liberalised economy in the region. There were many pitfalls and tensions, but we managed and learned from it. While we all see this export-led growth, behind this the real foundation is coming from agriculture, which is not known. It’s coming from mango and fish production. This has also helped us tremendously to achieve high growth. The weather patterns, particularly the monsoon, has helped these industries grow.
With the first round of questions over the discussion became more conversational. Responses were also peppered with humorous moments and participants had the opportunity of posing questions or voting for a question that would then receive priority with the moderators.
Q: What are the impacts and opportunities of Brexit to Sri Lanka?
UK: Britain will keep investing in free trade and will remain a strong advocate of free trade around the world. We are ambitious to grow trade with the world. Despite the bumpy circumstances we may face post Brexit, I’m confident Britain will get over them with the help of immediate neighbours and with the rest of the world. Those countries that benefited exporting to EU including Sri Lanka will be extended the same preferential rates. The Commonwealth is more clear and determined with the reforms it is going through.
The key is innovation and striving for excellence. The Swiss were condemned to innovation and striving for excellence because we cannot compete on price and we have a very small domestic market, so we are obliged to sell to the world – Switzerland Ambassador Hanspeter Mock
Q: What is the current status of the Colombo Port City and what are the opportunities for Sri Lankan companies?
China: Colombo Port City is a great opportunity for Sri Lanka. It reminds me of a similar situation of one of China’s cities Shenzhen. About 40 years ago Shenzhen was a very small village, located close to Hong Kong. At that time its GDP growth was only 0.2%, but last year Shenzhen surpassed Hong Kong’s economic growth. It was a result of turning it into a special economic zone with a lot of Foreign Direct Investments and innovation. Back then people of Shenzhen wanted to cross the border to Hong Kong and today Hong Kong people want to find jobs in Shenzhen. I believe we can make it happen again here in Sri Lanka, at the Port City.
Q: Does China look at the repayment capacity of economies when they lend, especially to countries like Sri Lanka?
China: China also have foreign debt. From the beginning, especially for developing countries, the usual practice is to start by borrowing money and then investing it. The only problem is how to find a balance for that, because you must think of how much you can repay. When can you repay? By borrowing so much of money what will you do with it? If you are borrowing to develop your local industries then it is fine. Is it going to benefit the local businesses and industries? But for the record, let me point out that loans from China only make up about 10% of Sri Lanka’s foreign debt.
Q: What steps did Canada take to improve education and how can Sri Lanka’s educated workforce be improved?
Canada: Canada engages a lot with Sri Lanka on education. A lot of Sri Lankans have been educated in Canada and continue to have roots there, and we are happy that relationship continues. Canada has a well-educated population and the highest rate of tertiary education in the world. Before Canada expanded into tertiary education, the focus was very much on universities, and then there was a realisation that every student needs to go to university.
We have a range of colleges that provide very applied and sophisticated degrees. It has allowed young Canadians to choose from a large number of platforms. Not every student responds to learning the same way, so if you have a rigid system then you leave a lot of talent behind. This change has opened up huge opportunities for young Canadians and has also led to a massive increase in our foreign student populations. I think students from around the world, including Sri Lanka, are realising that there is great advantage in a system that offers so much variety and flexibility.
Our country used to have petty corruption, especially when it came to public procurement but about eight years ago our Government brought in e-Government Procurement and today more than 70% of procurement is done through this portal. That has resulted in radical change and significant improvement in transparency – Bangladesh High Commissioner Riaz Hamidullah
Q: Corruption can be an impediment to growth. Can the panel share some insights on how to tackle this issue?
Malaysia: I was fortunate enough to attend the launch of the national anti-corruption plan for Sri Lanka. A month ago in Malaysia we had a similar pledge, and it also has a long-term plan to combat corruption. Corruption affects all of society and we have to be very serious about this and action has to be taken. Since our new government came into power, action has indeed been taken, and it will also strengthen Malaysia’s development and also help it to move forward.
Bangladesh: Our country used to have petty corruption, especially when it came to public procurement, but about eight years ago our Government brought in e-Government Procurement and today more than 70% of procurement is done through this portal. That has resulted in radical change and significant improvement in transparency.
Q: There is always resistance to this kind of reform. How did the Bangladesh Government overcome it?
Bangladesh: It is interesting. When the technology was initially brought in, people at the grassroots level did not realise how much change could happen. It’s all about how technology is brought in and how it is fused with the people and given sufficient ownership so they realise that something good is happening. This is one way countries like Sri Lanka and Bangladesh can work without having confrontation flare up.
Q: What technical assistance can the Netherlands give Sri Lanka, especially in agriculture?
Netherlands: Agriculture is very important to our country. We are the second-largest food exporter in the world and we are a very small country so we have to be efficient. Technology is very important and we try to share that knowledge, which is something we do with Sri Lanka. We take people to the Netherlands. We are very small here so we focus on poultry, dairy and horticulture. So it’s mainly training and sharing knowledge. We also learn from Sri Lanka and we also share technical knowledge. Recently we worked on the ‘Sena’ caterpillar issue as well.
Like Sri Lanka Bali is blessed with natural beauty and strong culture. Connectivity is very important for us and we also work a lot with local people to make them understand the importance of the tourism industry. Indonesia has also developed 10 destinations beyond Bali and has new places to explore – Indonesian Ambassador Gusti Ngurah Ardiyasa
Q: How does Switzerland create its world-class work ethic?
Swiss: I think it’s not just the work ethic. I think the key there is innovation and striving for excellence. Until the mid-1970s Switzerland was one of the poorest countries in Europe. Part of the reason for that was, unlike Sri Lanka, my country was not blessed with an abundance of soil richness. The success of Switzerland is quite recent, and I think one of the main reasons is innovation and striving for excellence.
I sometimes say that we Swiss were condemned to innovation and striving for excellence because we cannot compete on price and we have a very small domestic market, so we are obliged to sell to the world. The key is studying the niche product. This is true for watches, and chocolates. We do not produce any cocoa but we are one of the biggest exporters of chocolate to the world. We do not produce coffee but we sell coffee everywhere.
So the key is to create an innovative product of high quality that people are prepared to pay high prices for. We can do this because we have focused on a skilled labour force that is very enthusiastic about innovation. That explains where the success comes from and I think this can be done here as well.
Q: How can Sri Lanka increase tea exports to Turkey?
Turkey: The Turkish population consumes the largest amount of tea per capita in the world. After Sri Lanka, Turkey is also the fifth-largest tea producer in the world. There is a shortage of 50,000 metric tonnes of tea for consumption, and in 2017 Turkey was the largest importer of Ceylon Tea and last year we slipped to the second position after Iraq. About 30,000 metric tonnes of tea is already imported from Sri Lanka. Ceylon Tea is already well-known in Turkey, but it’s always good to promote, and that has been done in the past two years. Ceylon Tea is already a major import for Turkey.
In Sri Lanka you have a lot of educated people. There are many opportunities as the economy is growing. Reforms are being implemented, but it can move at a much faster pace. Also you are missing out on the women. I see huge potential in increasing women participation in Sri Lanka’s economy to create an enabling environment, to treat them as equals – Netherlands Ambassador Joanne Doornewaard
Q: Protectionism has become more popular, particularly since the election of US President Donald Trump. How do you see its impact on your countries and emerging markets?
EU: We have seen protectionism coming in. it started with steel tariffs, and even though we were not directly targeted, it did seep into some of our sectors and the EUs response was to come with a clear set of counter-measures. It has slowed down at the moment, but the risk remains. Protectionism is something everyone will lose at but I think it is important to stand up to it as well, otherwise there is no end to it.
Canada: We have in some ways been at the frontline of this, but I think one of the things that protectionism has done is introduce a lot of uncertainty to the global trading system and we need to remember the post-war prosperity came about because of the rules-based order of trade, starting with GAP and the World Trade Organisation (WTO). That predictability has been key to the prosperity of the world and the really troubling thing from my point of view is that we just don’t know what is next. That makes things difficult if you are in government and more importantly if you are in business.
Q: What kind of impact will China’s slowing growth have on Asia?
China: So far the ongoing exchange between the US and China have made substantial progress. Maybe we are standing at crossroads and we have to make our decision. Should we choose protectionism? Or free trade? Many years ago when China first joined the WTO there were different opinions inside China, but we joined the WTO because it was the global trend and we thought we should follow that.
As for slow down, we are encountering some slowdown but given the scale of China’s economy that is normal. We are not running a 100 metre race, we are running a marathon. So you need to control the pace. This year, China is expected to grow between 6% and 6.5%, and this will be enough to continue regional growth.
Transparency is one important factor for making a country attractive to investors. Another factor is energy prices. If someone wants to set up a company in London, it takes only eight minutes. In Sri Lanka, the approval process needs to be reformed. It takes ages to get approval for certain projects – Turkey Ambassador Tunca Ozcuhadar
Q: Bali is one eighth the size of Sri Lanka but last year received six million tourists. What is Bali doing that we can learn from?
Indonesia: Like Sri Lanka, Bali is blessed with natural beauty and a strong culture. Connectivity is very important for us, and we also work a lot with local people to make them understand the importance of the tourism industry. Indonesia has also developed 10 destinations beyond Bali and has new places to explore. Bali has also given free visa access to 169 countries, including Sri Lanka.
Q: Malaysia receives about 20 million tourists. Your thoughts on tourism development?
Malaysia: You recently launched your So Sri Lanka campaign. This is very important so people can relate to Sri Lanka. We had ‘Malaysia, Truly Asia’ for more than 25 years and we never changed it. That is brand building, and Sri Lanka is doing that. We had a very liberal visa policy and opened up to most countries. Sri Lanka is also heading in the same direction.
Pix by Upul Abayasekara and Ruwan Walpola
Part two to be published tomorrow.
The session wound up with each of the ambassadors being asked to give their views on what Sri Lanka should focus on in the short to medium term to improve growth.
UK: Sri Lanka is truly blessed with its natural beauty and heritage. I hear about the number of tourists regularly, but I think Sri Lanka needs to think hard between the numbers of tourists and tourist revenue – these are quite different things. The tourism policy going forward should think carefully in this regard about how to get this balanced, especially given the need to look after the natural environment, which makes this country so special.
Netherlands: Adding on to the previous comment – be careful of the taxes. Sri Lanka is quite expensive. Tourists compare. If you can stay three nights in Thailand for the same price of one day in Sri Lanka, tourists may think twice about why they need to come here.
Bangladesh: Sri Lanka needs to focus on how to create wealth for the 80% of Sri Lankans living in the rural areas. Around 70% of Bangladesh companies are SMEs which did the magic for our economy. They shifted from rice cultivation to mango cultivation. Today, Bangladesh is the fourth-largest mango exporter in the world. We have seen how wealth can get immediately into the hands of the most vulnerable sectors and how it has benefited strongly for our economy. This can also be recreated in Sri Lanka, to create wealth in the rural economy.
EU: Sri Lanka needs to further develop and position itself as a logistical hub in the Indian Ocean. To do that, you need to open up the market, let products in and investors in from port operations to customs to large-scale investment.
Turkey: Sri Lanka is positioned at a great location, which can be reached within three to four hours by 60% of the world’s population. To tap this huge potential, Sri Lanka needs to have practical and affordable flights, but the current flights are not enough. When someone lands at Bandaranaike International Airport (BIA), the connectivity facilities to the capital needs to be improved significantly, including road networks. If you want to go to Mt. Lavinia Hotel from the airport, it takes one hour and 40 minutes to go 43 kilometres; this is ridiculous after a 10-hour flight from Europe.
Passport control is also very time-consuming, there is no public transport from airport to downtown, and people have to carry the luggage by themselves; these need to be improved. Taxation is another issue. Last year, we had 40 million visitors to Turkey and generated $ 30 billion, which we reinvested on vocational training and infrastructure. We have also diversified our tourism, offering not by just focusing on sand and sea. Sri Lanka also needs to invest in improving infrastructure and look at other lucrative tourism offerings, like sports and adventure tourism for example, moving away from the conventional methods.
Swiss: Sri Lanka and Switzerland have a lot of similarities, such as several ethnicities and languages. As island nations. Switzerland also had a civil war in 1847 and shortly after that we had a new Constitution, in which it sought to take care of all ethnicities, religions and all the people of the country. Since then we have never had any conflicts. Sri Lanka can also apply that system.
Canada: Sri Lanka has extraordinarily talented women who had gone around the world and have a very successful education background. However, you all have the lowest women participation in the labour force; that is a huge missed opportunity for Sri Lanka. It’s important to understand that when you have a stable population to make use of their talent for the growth of the economy.
China: We would like to see a very open and a stable Sri Lanka. When you are open to the outside world it’s important to have consistent policies to attract FDIs. With FDIs there will be more benefits like technology transfers, economic expertise which can be adopted and used to improve local industries. China is keen to share its expertise with everyone including Sri Lanka.
