Sri Lanka – An Emerging Economy
in South Asia
By Abdul Raheem, Consul Commercial, SLCG/Sydney
Sri Lanka has always enjoyed the benefit of its strategic location, being at the crossroads of the major global shipping lanes and the fast growing economies. Sri Lanka is at the epicentre of a substantial portion of the next 20 years’ of world economic growth.
While the investment opportunities in various sectors are open, Sri Lanka has also put in place high-quality infrastructure to facilitate investment in the areas of specific investor interest. Moreover, specific investment zones, in the form of a mega industrial zone linked to the Hambantota port, the Colombo International Financial City (660 acres of reclaimed land, adjacent to the Colombo port), and specific new industrial parks targeting agricultural, manufacturing and IT exports represent the necessary backbone infrastructure for high-return generating investment projects.
On IT/BPM sector, Sri Lanka continues to build out a quality talent pool and a skilled workforce. Sri Lanka is ranked number one in South Asia in the ‘Human Capital–Skills’ criteria in the Global Competitiveness Index 2019.
Sri Lanka continues to develop more FTAs with large global economic blocs to provide investors with large market access. Sri Lanka is committed to open trade, which provides global investors with large market access through their operations in the country. There has been significant momentum on this front, with the FTA with Singapore in 2018 opening up the broader ASEAN market of 650 Million, while a lucrative FTA with China is also in the advanced stages. Sri Lanka also has in place the EU GSP (450 Million market), and notably is the only country to have FTAs with both India and Pakistan (duty free access to 1.6 Billion consumers). The unique and combined market opportunity available for businesses via these Trade Agreements is unmatched anywhere in South Asia.
International investors are also encouraged by the unprecedented political stability that Sri Lanka enjoys today, which paves the path to an environment of policy consistency over the medium to long term. The recently passed 2021 budget provides meaningful tax concessions and incentives to foreign investors across sectors and investment sizes, while also emphasizing a commitment to simplify regulations and improve investor protections.
Sri Lanka’s Trade and Economic Relations with Australia
The bilateral trade and economic relations continues to grow despite of challenging times created by Covid 19 pandemic in the world. Two way trades between Sri Lanka and Australia stood at USD 352 Million in 2019 and the balance of trade was in favour of Sri Lanka to an amount of USD 47 Million. Sri Lanka’s merchandise exports to Australia were USD 200 Million in 2019 and the top ten exports from Sri Lanka include Apparel, Tea, rubber tyres & rubber gloves, Coconut products, Virgin Coconut oil, Spices, Ethnic food items, Seafood etc.
Covid 19 pandemic has hit Sri Lanka’s exports to Australia at the beginning of the coronavirus spreading in early 2020. It went below USD 5 Million monthly exports in April 2020. However, exports from Sri Lanka to Australia had the V shape recovery and reached to a satisfactory level of USD 20.76 Million in December 2020. Total Sri Lanka’s exports to Australia reached to USD 178 Million compared to USD 200 Million in 2019 registering slight decrease of 12.9% due to unpresented crises of Covid 19 pandemic.
Sri Lanka Consulate General Office in Sydney continues to work with relevant stakeholders in Australia and Sri Lanka to enhance Sri Lanka’s exports into Australia and organized series of webinars with the Export Development Board, the Ceylon Chamber of Commerce, the National Chamber of Exporters of Sri Lanka, Victorian Chamber of Commerce and the Australian Chamber of Commerce and Industry to interact with Sri Lankan manufacturers and exporters to understand the Australian market conditions and requirements during the Covid 19 crisis that affected a number of economies in the world.
Due to Covid 19 Pandemic, tourist arrivals from Australia was affected significantly as there has been a ban on Australian travel overseas and the Australian international borders are closed until further notice. Opening the international borders would be the last to ease by the Australian Federal Government.
Australia was Sri Lanka’s 5th largest source of market for Sri Lanka tourism in 2019 and received 92,674 tourists from Australia. However 20,283 Australian tourists visited Sri Lanka from January to March 2020 before international borders closed due to coronavirus pandemic.
In order to keep the destination presence among the Australian travellers, Sri Lankan Missions in Australia continue to organise Webinars and publicities in promoting Sri Lanka Tourism. It is a considered view that travel a bubble could be reached between the two countries as Sri Lanka has already opened its airports for international tourists’ arrivals from 21st January 2020. Since all safety Covid 19 protocol guidelines are followed, it is expected that Australian travellers could also resume their holidays in Sri Lanka soon.
Sri Lanka and Australia signed a Trade and Investment Framework Agreement (TIFA) in 2017 with an aim to deepen economic cooperation between the two countries through establishment of the Joint Trade and Investment Committee. Next Senior Officials’ talks to be held in Australia when both countries agree on a mutual convenient time.