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Trade in Services: Sri Lanka needs to pull up its socks

Two previous Verité Insights titled “Sri Lanka missing world’s biggest trade party and its in her backyard” & “Trade Agreements that don’t deliver the goods” published in May and June 2013 pointed out that Sri Lanka is well behind her Asian neigbours in entering into trade agreements, and that those entered into were also deficient. This Insight shows that this is even more so the case with agreements that go beyond trade in goods to cover trade in services. This observation does not give a green light to ETCA (Economic and Technical Cooperation Agreement with India). but it does provide some context. Even though ETCA type agreements is ‘new territory’ for Sri Lanka, many of its neighbors in Asia have been quite vigorous in entering into such goods and services agreements in the last decade. The current debate on ECTA is around whether Sri Lanka should go ahead with the agreement or not. However, the important question to ask is what costs and benefits could accrue to Sri Lanka, and how that can be managed by the scope and structure of the agreement. Whether a trade agreement is beneficial or not depends greatly on those details. The experience with existing…

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Sri Lanka’s tea Industry – too long in adolescence, it’s time to grow up

Tea sector wage negotiations have been in deadlock now for 10 months. There are political reasons for this situation, but also an overarching economic one: global tea prices have declined – as it periodically happens – and the industry is not geared to compete. Tea is an industry in which Sri Lanka has established a global reputation – Ceylon tea, as it is known worldwide, is considered to be amongst the best black tea in the world. This is mostly a result of Sri Lanka’s climatic and geographic conditions, which yield a quality of tea that is exceptional. Post-independence, Sri Lanka started off with an industry that was inherited. The tea plantations came not only with factories and machinery, but even workers who had been transplanted from India by the British, who served in poor and difficult conditions in the tea estates. The industry in Sri Lanka has relied mostly on its inherited position and first mover advantage in the world. Today it is in a crisis of its own brewing – the advantage of having poorly paid workers is diminishing, and the industry has not succeeded in adding to its productive value to face global competition. Currently, the average…

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Exchange rate management: politics trumps professionalism

Most people in a country don’t understand the intricacies of exchange rate management. Nevertheless, actions in this regard have significant implications for the economic stability, growth and overall success of the economy, on which human development is fostered. This Insight explains how a professional approach to the management of the exchange rate seems to have been trumped by political considerations for much of 2015. The losses suffered by a lack of professionalism are not too different to the losses suffered due to corruption, and the lack of professionalism and corruption tend to be parasitic on each other. Therefore, this Insight also points to an important focus that has not yet been adopted by the agenda for good-governance.

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Sri Lanka’s post war growth: Still stuck in an unsustainable strategy

Sri Lanka has been driving post-war growth in boom and bust cycles on the trade deficit; and fiscal measures have been used, especially spending on construction, to offset the bust cycles. This strategy is now being squeezed to pulp and it is not sustainable going forward.

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Reviving Exports: The Relevance of Export Finance

This Insight analyses the importance of export finance as a tool to facilitate and promote exports in Sri Lanka. It identifies the bottlenecks that prevent effective use of export finance in the country and provides recommendations to improve availability, access and effective utilisation of export finance in the country.

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Fixing NTBs betwen India and Sri Lanka

Measures to prove compliance with an importing country’s standards and regulations are necessary for all exports. However, Sri Lankan exports to India suffer greatly from the associated costs and delays. This Insight proposes a Mutual Recognition Agreement (MRA) in Conformity Assessment Procedures (CAPs) to overcome this barrier and encourage further trade between Sri Lanka and India.

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Central Bank’s 30 Year Bond Debacle: What is the Loss?

In February 2015 the Central Bank of Sri Lanka called an auction for one billion rupees on a 30 year bond. It then accepted 10 fold – 10 billion rupees – after the bids were in. This Insight identifies three errors in the published calculation of the monetary loss, and recalculates it at 0.9 billion rupees. It also highlights two other issues: conflict of interest, and confidence in institutions, which add to the negative consequences of the Central Bank decision.

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Exports to India – Putting the free back into the FTA

Sri Lanka’s history with bi-lateral trade agreements demonstrates the need for more careful negotiation. This Insight explains how the tariff benefits of the India Sri Lanka FreeTrade Agreement (ISFTA) have been outweighed by the existance of non-tariff barriers (NTBs).

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What caused Europe to ban the import of fish from Sri Lanka?

The European Commission recently banned the import of Sri Lankan fisher-ies products for violating guidelines on Illegal, Unreported and Unregulated fishing. This Insight suggests that the ban was triggered by the behaviour of a small number of very large Chinese vessels run by a BOI registered company in Sri Lanka.

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Sri Lanka’s international borrowing costs are not declining

The government first raised international debt through bonds in October 2007. Since then several international bonds have been issued to feed the government’s twin demands: financing its spending and propping up foreign reserves. While this trend of foreign borrowing is on the rise, what is happening to the cost of borrowing? And what is the prognosis for the future?

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